Current stock price is $150; volatilityis 20% per annum. An at-the-money American put option on the...

Current stock price is $150; volatilityis 20% per annum. An at-the-money American put option on the stock expires in 3 months. Risk free rate is 5% per annum, continuously compounded. There is no dividend expected over the next 3 months. Use a 3-step CRR modelto price this option.

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Solution:

The Price of the option is $5.695. Below is the Excel screenshot of formula used.

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jeff jeffy answered 2 years ago

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Current stock price is $150; volatilityis 20% per annum. An at-the-money American put option on the...

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