Calculate current value of the european call option

Reference no: EM133240592

Question - Finance Discussion

Description - Learning Outcomes

Describe the attributes of the binomial option pricing model including the influence of early exercise.

Through the use of the binominal model, explain how a risk-free hedge of stock and option can be implemented.

Describe how the binomial model can be extended for any number of time periods.

Question - Consider a stock currently (S0) priced at SAR 80. One period later it can go up(u) by 25% or go down(d) by 20%. The risk-free rate is 7 percent. Calculate the current/theoretical value of the European call option if the exercise/strike price is SAR 80.

Reference no: EM133240592

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