Sally, an analyst, wants to value a two-year European call option on a non-dividend paying stock, using
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Question:
Sally, an analyst, wants to value a two-year European call option on a non-dividend paying stock, using the binomial option-pricing model. The call's strike price is 40. The annual riskless interest rate is 5.127%. The stock is currently priced at $42/share. The following formulae are used in the binomial model:
u=1.49, d=0.67114, π=(1+r-d)/(u-d), r=0.05127, c++=53.24, c+-=c-+=1.93, c--=0
Which of the following is closest to the value of a two-year European call option on a non-dividend paying stock with a strike price of 40?
Related Book For
Introduction To Stochastic Finance With Market Examples
ISBN: 9781032288277
2nd Edition
Authors: Nicolas Privault
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