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Find the price of a five-month european call option

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Reference no: EM132971152

We want to price options using the binomial lattice. The current stock price is 105 and the strike price is 100. Assume that the stock up-trend rate is u=1.1 with probability p=0.4 and the down-trend rate is d=0.9 with probability 1-p=0.6. The annual risk-free rate is r=0.01 (compounded discretely) . Assume that the length of a period is one month.

Problem 1: Find the price of a 5-month European call option

Reference no: EM132971152

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