The task is to numerically value 2 options, one call and one put (European or American) on one of the stocks selected in part 1 by using the binomial lattice framework and comparing the result with the Black-Scholes option valuation method. Guidelines:

1. The options to be valued and the underlying asset are to be selected according to the students choice

2. The two options, one call and one put must have the same strike price and maturity and the maturity must be at least 6 months.

3. Both results obtained using the binomial lattice and Black-Scholes formula have to be compared with the market price.

4. Put-call parity relationship needs to be shown.

5. The lattice should have at least 200 steps.

6. Sensitivity analysis should be performed.

Students are required to fully explain the procedure and estimation methods, assumptions and thoroughly compare their results with the market price of the option, identifying potential reasons for miss-pricing. Students need to fully refer to the academic literature rather than textbooks.