Question: use the information in the table to answer Variable Initial stock price (%) (dollars) Exercise valuc (X) (dollars) Term to maturity (T) (years) Number of
use the information in the table to answer
Variable Initial stock price (%) (dollars) Exercise valuc (X) (dollars) Term to maturity (T) (years) Number of time increments (N) (steps) Value 30 30 0.75 60 aximum stock pricc (Smax) (dollars Minimum stock price (Simin) (dollars) Number of stock price increments (M) Time increment At) (years) Stock price increment (AS) (dollars) Risk free rate (r) (continuously compounding annual rate) Dividend yield (k) (continuously compounding annual rate) Volatility () (the standard deviation of the yearly logarithmic returns) 0.25 10 10% vcar 0 0.4 Usc the information in the table above to answer the following: 1. Group 1-Price a dividend paying European Call option using thc Crank Nicholson finite different method by using the LU-Decomposition method to solve for V in AV- d Variable Initial stock price (%) (dollars) Exercise valuc (X) (dollars) Term to maturity (T) (years) Number of time increments (N) (steps) Value 30 30 0.75 60 aximum stock pricc (Smax) (dollars Minimum stock price (Simin) (dollars) Number of stock price increments (M) Time increment At) (years) Stock price increment (AS) (dollars) Risk free rate (r) (continuously compounding annual rate) Dividend yield (k) (continuously compounding annual rate) Volatility () (the standard deviation of the yearly logarithmic returns) 0.25 10 10% vcar 0 0.4 Usc the information in the table above to answer the following: 1. Group 1-Price a dividend paying European Call option using thc Crank Nicholson finite different method by using the LU-Decomposition method to solve for V in AV- d
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
