Suppose the today’s price for an AB3 share is $25. Over any given month, the share price may either go up by 4% with a p
Posted: Thu Apr 28, 2022 12:34 pm
Suppose the today’s price for an AB3 share is $25. Over any
given month, the share price may either go up by 4% with a
probability of 0.55, or go down by 5% with a probability of
0.45.
We are interested in pricing a European call option expiring in
4 months with a strike price of $24. The risk free rate of return
is 3% per annum. These inputs have been included in your template
spreadsheet.
First, fill in the binomial tree for the share price using the
given data. Then fill in the option value tree using appropriate
formulas. The entry in cell B16 should be the value of the call
option today.
How do you do this question step by step?
Thanks in advance.
А B с C D D E E F F G N 2 1 S. u 3 d 4 Pup $25 1.04 0.95 0.55 0.45 4 $24 un 1 N بلا 3 4 0 0 25 5 Pdown 6 Expiry (months) 6 7 Strike price 8 9 Time 10 Share price tree 11 12 13 14 15 16 Option value tree 17 18 19 20 21 22 23 24 25
given month, the share price may either go up by 4% with a
probability of 0.55, or go down by 5% with a probability of
0.45.
We are interested in pricing a European call option expiring in
4 months with a strike price of $24. The risk free rate of return
is 3% per annum. These inputs have been included in your template
spreadsheet.
First, fill in the binomial tree for the share price using the
given data. Then fill in the option value tree using appropriate
formulas. The entry in cell B16 should be the value of the call
option today.
- Suppose The Today S Price For An Ab3 Share Is 25 Over Any Given Month The Share Price May Either Go Up By 4 With A P 1 (21.73 KiB) Viewed 23 times
Thanks in advance.
А B с C D D E E F F G N 2 1 S. u 3 d 4 Pup $25 1.04 0.95 0.55 0.45 4 $24 un 1 N بلا 3 4 0 0 25 5 Pdown 6 Expiry (months) 6 7 Strike price 8 9 Time 10 Share price tree 11 12 13 14 15 16 Option value tree 17 18 19 20 21 22 23 24 25