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Employ a binomial model with 3 timesteps

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Consider the European call option with knockout barrier B = $125 and a fixed rebate of R = $25. Assume the spot price is $100, the time to maturity is 6 months, risk-free rate is 5%, the stock price goes up or down by 20%. Employ a binomial model with 3 timesteps. Use K=$100. Use monthly compounding.

Reference no: EM132813690

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