please draw a one step binomial tree to price a European call option with the following...
please draw a one step binomial tree to price a European call option with the following parameters:
the time t =1 refers to one year
Inputs: s = 50, k = 50, t = 1, v = 0.5, r = 0.05, y = 0, n = 1
Please Show all the steps in how to arrive at the answer
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please draw a one step binomial tree to price a European call
option with the following...
Please draw a one step binomial tree to price a European call option with the following parameter...
please draw a one step binomial tree to price a European call option with the following parameters: the time t =1 refers to one year Inputs: s = 50, k = 50, t = 1, v = 0.5, r = 0.05, y = 0, n = 1 Please Show all the steps in how to arrive at the answer
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
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...
1 In this problem c(K,T) denotes the price of a European call option with strike price...
1 In this problem c(K,T) denotes the price of a European call option with strike price K and strike time T, p(K,T) is the price of the identical put option, r is the risk-free rate and So is the current price of the underlying security. Which of the following are correct? i 0 <c(50,T) - c(55,T) <5e-rT ii 50e-rT <p(45, T) - c(50,T) + So < 55e-rT iii 45e-T <p(45, T) - c(50,T) + So < 50e-rT
Question 3 - 20 Points Consider a European call option on a non-dividend-paying stock where the...
Question 3 - 20 Points Consider a European call option on a non-dividend-paying stock where the stock price is $33, the strike price is $36, the risk-free rate is 6% per annum, the volatility is 25% per annum and the time to maturity is 6 months. (a) Calculate u and d for a one-step binomial tree. (b) Value the option using a non arbitrage argument. (c) Assume that the option is a put instead of a call. Value the option...
Use a two-step binomial model to evaluate a call option on a stock with the following...
Use a two-step binomial model to evaluate a call option on a stock with the following price projections. The current stock price is $80 and the strike price on the options is $82. The option expires in 6 months so each step is 3 months. The risk- free rate is 5%. What is the value of the call option? Note: to be eligible for partial credit, please show your work as much as possible and be sure to clearly indicate...
Finance - option pricing: Alex is looking to price a 6-month European put option with a...
Finance - option pricing:
Alex is looking to price a 6-month European put option with a strike price of $29 on a share in Omni Consumer Products (OCP). The current price for an OCP share is $30. Alex has used past data and his own judgement to estimate the volatility of these shares to be 15% per annum. The risk-free continuously compounding interest rate is 5% per year. a) Construct a 3-step binomial tree showing the possible share prices over...
Problem 12.25. Consider a European call option on a non-dividend-paying stock where the stock price is $40, the strike price is $40, the risk-free rate is 4% per annum, the volatility is 30% per annu...
Problem 12.25. Consider a European call option on a non-dividend-paying stock where the stock price is $40, the strike price is $40, the risk-free rate is 4% per annum, the volatility is 30% per annum, and the time to maturity is six months a. Calculate u, d, and p for a two step tree b. Value the option using a two step tree. c. Verify that DerivaGem gives the same answer d. Use DerivaGem to value the option with 5,...
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...
Consider a two-step binomial tree where the spot price of the underlying is currently $20. In...
Consider a two-step binomial tree where the spot price of the underlying is currently $20. In each of the two time steps, the spot price may go up by 10% or down by 10%. Suppose that each time step is 3 months long and the risk-free rate is 12% per year. (a) Value a 6-month European call with a strike price of $21. (b) How would your analysis change if you were valuing an American call instead? 2
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...
1 In this problem c(K,T) denotes the price of a European call option with strike price K and strike time T, p(K,T) is the price of the identical put option, r is the risk-free rate and So is the current price of the underlying security. Which of the following are correct? i 0 <c(50,T) - c(55,T) <5e-rT ii 50e-rT <p(45, T) - c(50,T) + So < 55e-rT iii 45e-T <p(45, T) - c(50,T) + So < 50e-rT
Question 3 - 20 Points Consider a European call option on a non-dividend-paying stock where the stock price is $33, the strike price is $36, the risk-free rate is 6% per annum, the volatility is 25% per annum and the time to maturity is 6 months. (a) Calculate u and d for a one-step binomial tree. (b) Value the option using a non arbitrage argument. (c) Assume that the option is a put instead of a call. Value the option...
Use a two-step binomial model to evaluate a call option on a stock with the following price projections. The current stock price is $80 and the strike price on the options is $82. The option expires in 6 months so each step is 3 months. The risk- free rate is 5%. What is the value of the call option? Note: to be eligible for partial credit, please show your work as much as possible and be sure to clearly indicate...
Finance - option pricing:
Alex is looking to price a 6-month European put option with a strike price of $29 on a share in Omni Consumer Products (OCP). The current price for an OCP share is $30. Alex has used past data and his own judgement to estimate the volatility of these shares to be 15% per annum. The risk-free continuously compounding interest rate is 5% per year. a) Construct a 3-step binomial tree showing the possible share prices over...
Problem 12.25. Consider a European call option on a non-dividend-paying stock where the stock price is $40, the strike price is $40, the risk-free rate is 4% per annum, the volatility is 30% per annum, and the time to maturity is six months a. Calculate u, d, and p for a two step tree b. Value the option using a two step tree. c. Verify that DerivaGem gives the same answer d. Use DerivaGem to value the option with 5,...
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