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Find the value of this option using the Black-Scholes model

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Question - Consider a stock with a current price S=200 and a standard deviation of annual returns 30%. Consider a 1-year European put option on this stock with a strike price of $200. The risk-free interest rate is 8%, and the stock does not pay any dividends.

a) Find the value of this option using the Cox-Ross-Rubenstein 2-step binomial option pricing model.

b) Using Excel, find the value of this option using the Cox-Ross-Rubenstein 10-step binomial option pricing model.

c) Using Excel, find the value of this option using the Cox-Ross-Rubenstein 20-step binomial option pricing model.

d) Using Excel or any other methods (except option price calculators), find the value of this option using the Black-Scholes model.

Reference no: EM132930678

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