Question: Use a three-time-step tree to value an American put option on the geometric average of the price of a non-dividend-paying stock when the stock price

Use a three-time-step tree to value an American put option on the geometric average of the price of a non-dividend-paying stock when the stock price is $40, the strike price is $40, the risk-free interest rate is 10% per annum, the volatility is 35% per annum, and the time to maturity is three months. The geometric average is measured from today until the option matures.

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In this case This means that The option pays off where denotes the geometric average The ... View full answer

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