Problem

35. The current stock price is $100. Price a half-year average strike Asian call option if...

35. The current stock price is $100. Price a half-year average strike Asian call option if the stock volatility is 30%, and the annual risk-free rate is 10%. Use a tree model with six monthly steps. Compare the price you arrive at with the price of an otherwise identical average price Asian call at a strike of $100. State intuitively why the prices are different.

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Solutions For Problems in Chapter 19