Consider the following option Stock price =100 Strike K-95 Volatility=20% Expiry T = 3 months Dividend...

Transcribed Image Text:

Consider the following option Stock price =100 Strike K-95 Volatility=20% Expiry T = 3 months Dividend yield = 2% Stock expected return = 6% Risk free = 3% 1) Calculate price of European call a. (20 points) Binomial tree b. (20 points) Finite difference method c. (20 points) Black Sholes-Gaussian Distribution d. (20 points) Black Scholes-Monte Carlo 2) (20 points) Calculate price of American call Consider the following option Stock price =100 Strike K-95 Volatility=20% Expiry T = 3 months Dividend yield = 2% Stock expected return = 6% Risk free = 3% 1) Calculate price of European call a. (20 points) Binomial tree b. (20 points) Finite difference method c. (20 points) Black Sholes-Gaussian Distribution d. (20 points) Black Scholes-Monte Carlo 2) (20 points) Calculate price of American call

Answer rating: 100% (QA)

1 Calculate the price of a European call option a Binomial Tree To calculate the price of a European call option using the binomial tree method we need to construct a binomial tree and calculate the o... View the full answer