Problem

23. Suppose the initial price of the stock is $100. The binomial process has an upshift u...

23. Suppose the initial price of the stock is $100. The binomial process has an upshift u = 1.5 and a downshift d = 0.6 per period. The interest rate per period is assumed to be zero. What is the risk-neutral probability that the stock finishes above a price of $200 after six periods? What is the price of the six-period call at a strike of $200?

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Solutions For Problems in Chapter 12