Question
In: Finance
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?
Solutions
jeff jeffy answered 2 years agoRelated Solutions
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.
Use a 2-step binomial tree to price an american style put option when the current stock...
Use a 2-step binomial tree to price an american style put option
when the current stock price is $50 and the stock price will move
up or down by 20 percent at each time(that is, the ending stock
price are $72,$48, and $32). The strike price on the option is $52
and the risk-free interest rate is 5 percent per step. Please
report your answer to two decimal places.
A stock price is currently $50. A stock price is currently $50. Over each of the...
A stock price is currently $50. 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. Use two-period binomial models to
value the six-month options on this stock. Remember to show
detailed calculations of the option value at each node.
(a) What is the value of a six-month European call option with a...
A stock price is currently $50. A stock price is currently $50. Over each of the...
A stock price is currently $50. 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. Use two-period binomial models to
value the six-month options on this stock. Remember to show
detailed calculations of the option value at each node.
(a) What is the value of a six-month European call option with a...
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 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...
Calculate three step Binomial tree call option price please. Stock price = 124.2862, Strike price =...
Calculate three step Binomial tree call option price please.
Stock price = 124.2862, Strike price = 120, Volatility = 20%,
Interest rate= 0.15%, Days to expiration = 247 days / 365 days
Thank you so much
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.
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