Question: Why option prices are different by using binomial pricing model and Black-Scholes model. Which option price (from both binomial and Black-Scholes model) do you think

Why option prices are different by using binomial pricing model and Black-Scholes model. Which option price (from both binomial and Black-Scholes model) do you think is more accurate?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock 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!

1. Below is the information about stocks A and B. If someone insists that you cannot construct an optimal portfolio composed of these two stocks without short sales, please show whether this argument...

(c) Consider a one-year European call option with non-dividend paying stock, initial price $100, continuously compounded risk-free interest 0.05 per annum, volatility 0.25, and strike price $120. By...

K L M N P Q R 55,000,000 fixed loan NFLX 55,000,000 GOLDMAN GOLDMAN NFLX floating floating interest rate NFLX agrees to pay 4.58% per annum on a notional $55m at 6 month intervals for 5 years....

a) Using a Binomial pricing model with 1-month steps, find the price of a 3-month American Call and a 3- month American Put option with the following details: So 81 Strike Price 80 %Change Up/Down 5%...

a) Using a Binomial pricing model with 1-month steps, find the price of a 3-month American Call and a 3-month American Put option with the following details: So 81 Strike Price 80 %Change Up/Down...

Any data you need is in the picture a) Using a Binomial pricing model with 1-month steps, find the price of a 3-month American Call and a 3-month American Put option with the following details: So 81...

3. Option Pricing a) Using a Binomial pricing model with 1-month steps, find the price of a 3-month American Call and a 3-month American Put option with the following details: So 81 Strike Price 80...

a) Using a Binomial pricing model with 1-month steps, find the price of a 3-month American Call and a 3-month American Put option with the following details: b) According to the Binomial model in...

Problem 1: Put Option The current price of firm A is $45. The yearly variance of returns is 15% and the CC yearly return is 10%. The CCIR risk free is 2%. Assume T=1 year. The stock does not pay...

The Polishing Department of Burgoa Manufacturing Company has the following production and manufacturing cost data for September. Materials are entered at the beginning of the process. Production:...

P&Gs impressive portfolio includes some of the strongest brand names in the world. What are some of the challenges and risks associated with being the market leader in so many categories?

Dfinissez la stratgie verte et fournissez une application concrte de celle-ci en comptabilit

A convenience store recently started to carry a new brand of soft drink. Management is interested in estimating future sales volume to determine whether it should continue to carry the new brand or...

3. What values would you say are your core values?

12. Think of a situation where you felt particularly powerless. It must be a real event that you remember relatively well. Try to think back. What was it you imagined just before you felt powerless...

13. Try to imagine how you would feel if you had tackled the problem, the con-flict, the challenge, etc., that made you powerless in task 12, for example upstairs, confident, confident, calm,...