Page 1 of 1
Consider a two-step binomial tree model for the price of a stock paying no dividend. Suppose the stock price is 100 now.
Posted: Sat Nov 27, 2021 5:16 pm
by answerhappygod
- Consider A Two Step Binomial Tree Model For The Price Of A Stock Paying No Dividend Suppose The Stock Price Is 100 Now 1 (32.03 KiB) Viewed 73 times
Consider a two-step binomial tree model for the price of a stock paying no dividend. Suppose the stock price is 100 now. The stock price may go up 20% or down 10% in each step. The risk-free interest rate is 12% per annum with continuous compounding. Determine the price of an American option on the stock maturing in one year with the payoff function g(S) = (130 – S)+ + (S – 110)+. =