In a binomial tree model, S0=32. In the next period, ST is either 35 or 30....
In a binomial tree model, S0=32. In the next period, ST is either 35 or 30. Assume interest rate is 0. Calculate the price of a call option with strike equal to 31.
A. 0.6 B. 1 C. 1.6 D. 2
Homework Answers
Price of call=(probability of upmove*Call payoff in
upmove+(1-probability of upmove)*Call payoff in
downmove)/(1+r)=((1-30/32)/(35/32-30/32)*MAX(35-31,0)+(1-(1-30/32)/(35/32-30/32))*MAX(30-31,0))/(1+0)=$1.60000
Add Answer to:
In a binomial tree model, S0=32. In the next period, ST is
either 35 or 30....
In a binomial tree model, S0=33. In the next period, ST is either 35 or 30....
In a binomial tree model, S0=33. In the next period, ST is either 35 or 30. Assume interest rate is 0. Calculate the price of a call option with strike equal to 31. 1 1.6 2 2.4
Part II (Binomial Tree) ai' 1. Compute the price of a call option using the stock...
Part II (Binomial Tree) ai' 1. Compute the price of a call option using the stock price tree u1.4634 and d=0.7317. The stock price is $38. The strike price is 840 and the interest rate is 8%. The time-period is 6 month. Use a 2 stage binomial tree 2. Assume that where ?-8%, the dividend yield ?. 0, ? is the annual standard deviation and ?VE is the standard deviation over a period of length h. The initial stock price...
Consider a one-period binomial model for a long straddle (which results in a payoff of St-K)....
Consider a one-period binomial model for a long straddle (which results in a payoff of St-K). A stock is currently priced at $100 and goes up by 10% or down by 7% in each time period. Assume an interest rate of 5% in each time period. If you purchase a straddle with a strike price of $110 and price it using a 2-period binomial model, what is the appropriate price? No excel. Please show your work in detail.
NEED HELP WITH ALL QUESTIONS PLEASE!!!!! 14. Consider a one period binomial model. The initial stock...
NEED HELP WITH ALL QUESTIONS PLEASE!!!!!
14. Consider a one period binomial model. The initial stock price is $30. Over the next 3 months, the stock price could either go up to $36 (u = 1.2) or go down to $24 (d = 0.8). The continuously compounded interest rate is 6% per annum. Use this information to answer the remaining questions in this assignment. Consider a call option whose strike price is $32. How many shares should be bought or...
Consider a model for a security with time zero value S0 = 150, a yearly effective...
Consider a model for a security with time zero value S0 = 150, a yearly effective interest rate of .01% and volatility σ^2 = (.02)^2 . Implement a binomial model to price option in python. 3. Price an Asian Call Option with payoff ((1/T)(Integral from 0 to T)(Stdt) − X)+ with expiry T = 1/2 years and strike price X = 150. Carry out the binomial model in N = 25 an N = 50, steps.
A 1-year European call option is modeled with a 1-period binomial tree with u = 1.2, d = 0.7.
A 1-year European call option is modeled with a 1-period binomial tree with u = 1.2, d = 0.7. The stock price is 50. The strike price is 55. The stock pays no dividends. The call premium is 3.10. σ = 0.25.Determine the risk-free rate
1) consider a CRR model T = 2, S0= $100 , S1 = $200 or S1 = $50 an associated European call optio...
1) consider a CRR model T = 2, S0= $100 , S1 = $200 or S1 = $50 an associated European call option with strike price k = $80 and exercise time T = 2 assume that the risk free interest rate r = 0.1 a) draw the binary tree and compute the arbitrage free initial price of the European call option at time zero. b) Determine an explicit hedging strategy for this option c) Suppose that the option is...
Using a binomial tree, calculate the price of a $40 strike 6-month call option, using 3-month...
Using a binomial tree, calculate the price of a $40 strike 6-month call option, using 3-month intervals as the time period. Using the US system. Assume the following data: S = $37.90, r = 5.0%, σ = 30%.
1. (5 points) Find the value of a call option using a one-period binomial lattice model....
1. (5 points) Find the value of a call option using a one-period binomial lattice model. The underlying stock has initial price $100 and lattice parameters u = 5/4, d = 4/5. The risk free interest rate is 10% and the strike price is $105.
Consider a two-period binomial model, where each period is 6 months. Assume the stock price is...
Consider a two-period binomial model, where each period is 6 months. Assume the stock price is $46.00, o=0.28, r=0.06 and the dividend yield is 2.0%. What is the maximum approximate strike price where early exercise would occur with an American call option at point Su? Assume that the strike price K is a whole number
Part II (Binomial Tree) ai' 1. Compute the price of a call option using the stock price tree u1.4634 and d=0.7317. The stock price is $38. The strike price is 840 and the interest rate is 8%. The time-period is 6 month. Use a 2 stage binomial tree 2. Assume that where ?-8%, the dividend yield ?. 0, ? is the annual standard deviation and ?VE is the standard deviation over a period of length h. The initial stock price...
NEED HELP WITH ALL QUESTIONS PLEASE!!!!!
14. Consider a one period binomial model. The initial stock price is $30. Over the next 3 months, the stock price could either go up to $36 (u = 1.2) or go down to $24 (d = 0.8). The continuously compounded interest rate is 6% per annum. Use this information to answer the remaining questions in this assignment. Consider a call option whose strike price is $32. How many shares should be bought or...
1. (5 points) Find the value of a call option using a one-period binomial lattice model. The underlying stock has initial price $100 and lattice parameters u = 5/4, d = 4/5. The risk free interest rate is 10% and the strike price is $105.
Consider a two-period binomial model, where each period is 6 months. Assume the stock price is $46.00, o=0.28, r=0.06 and the dividend yield is 2.0%. What is the maximum approximate strike price where early exercise would occur with an American call option at point Su? Assume that the strike price K is a whole number
Most questions answered within 3 hours.
-
An electron passes through a point 2.67 cm from a long straight
wire as it moves...
asked 24 minutes ago -
A grammar is a 4-tuple G, G = (Ν, Σ, Π, Σ, S) where, Ν is...
asked 1 hour ago -
In this part, calculate the present values. Use the Excel PV
function to compute the present...
asked 1 hour ago -
Part 1. Primitive Types, Sorting, Recursion for
Homework.java
a) Implement the static method initializeArray that receives...
asked 2 hours ago -
Using C++, build a sorter that can rank a sequence of numbers in
a descending order....
asked 2 hours ago -
Derive ground state term symbols. Use notation 2S(1/2) for state
2S1/2
a) d5
b) f3
c)...
asked 2 hours ago -
A sample of size 31 will be drawn from a population with mean 39
and standard...
asked 3 hours ago -
What is the effect on the P-value when a test is changed from a
two-tailed hypothesis...
asked 3 hours ago -
I wish to estimate µ, the mean of a population. After I collect
and an-
alyze...
asked 3 hours ago -
At a local university, you poll a group of 115 students and find
that 37 of...
asked 3 hours ago -
Gladstone company tracks the number of units purchased and sold
throughout each accounting period but applies...
asked 3 hours ago -
When determining if a molecule's configuration is E or Z, what
determines the higher priority groups?
asked 3 hours ago