Given the three-period binomial model where S = 30, = 40%, 1=0.05, T=12 months, and K=35...

  

Transcribed Image Text:

Given the three-period binomial model where S = 30, = 40%, 1=0.05, T=12 months, and K=35 S33 $11 $22 S32 V V V So S10 S20 S31 S30 a. Compute the European and American put prices. b. At which node(s) will the American put be exercised early? Given the three-period binomial model where S = 30, = 40%, 1=0.05, T=12 months, and K=35 S33 $11 $22 S32 V V V So S10 S20 S31 S30 a. Compute the European and American put prices. b. At which node(s) will the American put be exercised early?