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Consider a stock which is currently selling for $50. Construct a two-step binomial tree, 1-month and...
Consider a stock which is currently selling for $50. Construct a two-step binomial tree, 1-month and 2-months respectively for each of the two steps. The stock market volatility is 30%, the rate of interest is assumed to be 5% and the exercise price is $52. (i) Calculate the price of an American Put. (ii) Provide a graphical illustration to demonstrate how the put price and the put payoff change with respect to changes in the stock price. (iii) Put all in an excel attachment or copy and paste entire excel sheet
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Formulas used in excell
jeff jeffy answered 7 months agoRelated Solutions
Consider a stock which is currently selling for $50. Construct a two-step binomial tree, 1-month and...
Consider a stock which is currently selling for $50. Construct a
two-step binomial tree, 1-month and 2-months respectively for each
of the two steps. The stock market volatility is 30%, the rate of
interest is assumed to be 5% and the exercise price is $52.
(i) Calculate the price of an American Put.
(ii) Provide a graphical illustration to demonstrate how the put
price and the put payoff change with respect to changes in the
stock price.
(iii) Put all...
Consider a binomial tree problem for an American option. A stock price is currently $50. Over...
Consider a binomial tree problem for an American option.
A stock price is currently $50. Over each of the next two
3-month periods it is expected to go up by 7% or down by 6%. The
risk-free interest rate is 5% per annum with continuous
compounding. What is the value of a 6-month American put option
with a strike price of $51?
The current price of a non-dividend paying stock is $50. Use a two-step binomial tree to...
The current price of a non-dividend paying stock is $50. Use a
two-step binomial tree to value a European call option on the stock
with a strike price of $52 that expires in 6 months, so each step
is 3 months, the risk free rate is 4% per annum with continuous
compounding. What is the option price when u = 1.1 and d = 0.9
The current price of a non-dividend paying stock is $50. Use a two-step binomial tree to...
The current price of a non-dividend paying stock is $50. Use a
two-step binomial tree to value a European call option on the stock
with a strike price of $52 that expires in 6 months, so each step
is 3 months, the risk free rate is 4% per annum with continuous
compounding. What is the option price when u = 1.1 and d = 0.9?
Please enter your answer rounded to two decimal places (and no
dollar sign).
Consider a one-step binomial tree on stock with a current price of $200 that can go...
Consider a one-step binomial tree on stock with a current price
of $200 that can go either up to $230 or down to $170 in 2 years.
The stock does not pay dividend. Continuously compounding interest
rate is 5%. Use the tree to compute the value of a 2-year
$210-strike European call option on the stock. Answer in four
decimal place.
Consider a two-period binomial model in which a stock trades currently at $44. The stock price...
Consider a two-period binomial model in which a stock trades
currently at $44. The stock price can go up 6% or down 6% each
period. The risk free rate is 2% per period.
A) Calculate the price of a call option expiring in two periods
with an exercise price of $45.
B) Calculate the price of a put option expiring in two periods
with an exercise price of $45.
Consider a two-period binomial model in which a stock trades currently at $44. The stock price...
Consider a two-period binomial model in which a stock trades
currently at $44. The stock price can go up 6% or down 6% each
period. The risk free rate is 2% per period.
A) Calculate the price of a call option expiring in two periods
with an exercise price of $45.
B) Calculate the price of a put option expiring in two periods
with an exercise price of $45.
C) Based on your answer in A), calculate the number of...
Consider the following case of a binomial option pricing. A stock is currently trading at $50....
Consider the following case of a binomial option pricing. A
stock is currently trading at $50. Next period the stock price can
go up to Smax or down to Smin.The call option
with the exercise price of $50 is currently trading at $9.14. The
risk-free rate is 7.5% and the hedge ratio is 5/7. Calculate
numerical values of Smax and Smin.
Consider a two-period binomial model in which a stock currently trades at a price of K65....
Consider a two-period binomial model in which a stock currently
trades at a price of K65. The stock price can go up 20 percent or
down 17 percent each period. The risk-free rate is 5 percent.
(i) Calculate
the price of a put option expiring in two periods with an exercise
price of K60.
(ii) Calculate the
price of a call option expiring in two periods with an exercise
price of K70.
Consider a two-period binomial model in which a stock currently trades at a price of K65....
Consider a two-period binomial model in which a stock
currently trades at a price of K65. The stock price can go up 20
percent or down 17 percent each period. The risk-free rate is 5
percent. Calculate the price of a put option expiring in two
periods with exercise price of K60.
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