Construct the Binomial Tree

Reference no: EM133277905

Question - Binomial Trees: S(0) = 40, K = 40, σ = 30.00%, r = 8.00%, q = 0, T = 0.5 yr, N = 2

a) Solve for u and d using the Drifted Binomial model.

b) Construct the Binomial Tree. Use the replication of risk approach to show call option premium, Δ, and B at every node of the tree.

Reference no: EM133277905

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