Consider the binomial problem below Annual risk free rate is equal to 12%. Current stock price is

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Consider the binomial problem below

Annual risk free rate is equal to 12%. Current stock price is equal to $75 per share. The stock could goes up by 22% or goes down by 10% at the end of the year. You want to evaluate a European option on this stock with the maturity of one year.

a) Price a call option on this stock with the exercise price X = 80.

b) Price a put option on this stock with the exercise price X = 80.

c) Verify if the results you get from a) and b) satisfy put-call parity?

Related Book For answer-question

Bond Markets Analysis and Strategies

ISBN: 978-0133796773

9th edition

Authors: Frank J.Fabozzi

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Posted Date: Apr 11, 2023 02:42 AM

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Consider the binomial problem below Annual risk free rate is equal to 12%. Current stock price is

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Bond Markets Analysis and Strategies

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