(b) A stock currently trades at a price of £50. Assume that after two months the stock price will either be a multiple o

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(b) A stock currently trades at a price of £50. Assume that after two months the stock price will either be a multiple o

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B A Stock Currently Trades At A Price Of 50 Assume That After Two Months The Stock Price Will Either Be A Multiple O 1
B A Stock Currently Trades At A Price Of 50 Assume That After Two Months The Stock Price Will Either Be A Multiple O 1 (40.19 KiB) Viewed 12 times
USE BINOMIAL PRICING TREE METHOD PLEASE
(b) A stock currently trades at a price of £50. Assume that after two months the stock price will either be a multiple of u = 1.06 or d = 0.96 of its current price. The risk-free interest rate is 10% per annum with continuous compounding. Determine the value of a two-month European call option with a strike price of £49 using risk-neutral valuation. (40% weighting) (c) What are the differences in valuing European put options and American put options when using the Binomial Option Pricing Model? (30% weighting)
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