Consider european call option on share

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Reference no: EM132017395

Consider a European call option on a share of Ding Corporation, a non-dividend paying stock. The current stock price is $19, the call’s strike price is $19.50, the risk free rate is 4% simple annual rate, and the underlying stock’s volatility (standard deviation of returns) is 33% per annum. The call’s time to maturity is 1 month.

a. Value the call option using the binomial model with 2 steps

b. Revalue the call option using the binomial model with 12 steps.

Reference no: EM132017395

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