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12.12. A stock price is currently $50. Over each of the next two three-month periods it is expected to go up by 6% or do
Posted: Tue Nov 16, 2021 7:46 am
by answerhappygod
- 12 12 A Stock Price Is Currently 50 Over Each Of The Next Two Three Month Periods It Is Expected To Go Up By 6 Or Do 1 (113.84 KiB) Viewed 80 times
12.12. A stock price is currently $50. Over each of the next two three-month periods it is expected to go up by 6% or down by 5%. The risk-free interest rate is 5% per annum with continuous compounding. What is the value of a six-month European call option with a strike price of $51? 12.13. For the situation considered in Problem 12.12, what is the value of a six-month European put option with a strike price of $51? Verify that the European call and European put prices satisfy put-call parity. If the put option were American, would it ever be optimal to exercise it early at any of the nodes on the tree?