Current stock price So=$100 Stock price can take only two possible values at option expiration: Go...

 

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Current stock price So=$100 Stock price can take only two possible values at option expiration: Go up by u=1.5 with a probability of p=0.8 Do down by d=0.6 with a probability of (1-p)=0.2 X=$120 T=1 period (expiration date) R₁=5% per period What is the call option price Co? Current stock price So=$100 Stock price can take only two possible values at option expiration: Go up by u=1.5 with a probability of p=0.8 Do down by d=0.6 with a probability of (1-p)=0.2 X=$120 T=1 period (expiration date) R₁=5% per period What is the call option price Co?

Answer rating: 100% (QA)

1 Define the parameters Current stock price So 100 Upward movement factor u 15 Downw... View the full answer