Question: Keep at least 4 decimals in all calculations. This answer will get multiple thumbs up if correct. TSAK stock price is $245. It will either

Keep at least 4 decimals in all calculations.

This answer will get multiple thumbs up if correct.

TSAK stock price is $245. It will either increase or decrease 10% in month 1 and 15% in month 2. The monthly risk-free interest rate is 6.5%.

  1. Using the risk-neutral probability approach, find the premium of a 2-month put option with strike price of $244.
  2. Using the replicating portfolio approach, find the premium of a 1-month call option with strike price of $244.

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