Question: In the binomial model, the risk-free interest rate discounted expected payoff of a call option using actual probabilities is $3.296, the market price of risk

In the binomial model, the risk-free interest rate discounted expected payoff of a call option using actual probabilities is $3.296, the market price of risk 0.0427, and the risk of the call option is $5. Then, the price of the call option is?

Step by Step Solution

3.38 Rating (148 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock

To determine the price of the call option we can use the formula for pricing options in the ... View full answer

blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!