Binomial option pricing model homework

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Reference no: EM131850123

Binomial Option Pricing Model Homework

Data from the Chicago Board of Options Exchange were obtained. The risk-free interest rate was 1.03%. The current price at the point of time the data was collected for the underlying stock was $51.45 per share.

Assume a two period binomial option pricing model is being used. Working with a MAR 50 American style call but without the dividend and assuming the stock can move up by 5% or down by 5%, demonstrate the portfolio return at the end of each of two time periods with appropriate rebalancing of the portfolio.

Reference no: EM131850123

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