A stock is currently trading at $50; its annual volatility is 0.40, the risk-free interest rate is 15% per annum with co

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answerhappygod
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A stock is currently trading at $50; its annual volatility is 0.40, the risk-free interest rate is 15% per annum with co

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A stock is currently trading at $50; its annual volatility is
0.40, the risk-free interest rate is 15% per annum with
continuous compounding, and ∆t is equal to three months. Use
the binomial model to answer the following questions:
Calculate the price of a 6-month European put option with an
exercise price of $105 written on this stock.
(5 marks)
Calculate the price of a 6-month American put option with an
exercise price of $105 written on this stock.
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