Find the value of a european call

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The stock of MBIC is currently trading at $108 per share and has an annual volatility (i.e., standard deviation) of 23.5%. The risk-free interest rate is 2.5% compounded continuously.

A. Using a four-step binomial tree to find the value of a European call with a strike price of $100 and a maturity of 12 months.

B. Use the same tree to find the value of an American call with the same features.

C. Using a four-step binomial tree to find the value of a European put with a strike price of $110 and a maturity of 18 months. Please also calculate delta.

D. Use the same tree in C) to find the value of an American put with the same exercise price ($110) and time to maturity (18 months). Please also calculate delta and compare with the one in C).

Reference no: EM133067991

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