We are having the following binomial tree
The value of the option can be calculated using the following formula
When price = $ 65.9344
We have used the Pay off of Put option that is K - St because a put option is excercised when K is greater than St.
Calculate the probability of upward movement
Probabilaity of downward movement
1 - P = 1 - 0.5625 = 0.4375
Here we have to determine the Value of put option node wise. As we can see from thje binomial tree only the node with a value of 47.04 lead to a positive value thus we have to calculate the value for this only.
Other node that is the node with a value of 56.84 leads to a option value of 0. Hence we need not to calculate the value here.
The value of the put option for this intermediate node can be determined as
Now calculating the value of the option
Here the maturity of option is 2 years so i have divided each time step of 1 year.
Please contact if still having any query will be obliged to you for your generous support, please help. Thank you
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