The binomial option price for an american call option

Assignment Help Financial Management

Reference no: EM131625317

"Given the following, answer the questions that follow: S= $100, K = $95, r = 8% (and continuously compounded), σ = 30%, δ= 0, T = 1 year, and n= 3. "

a. Confirm that the binomial option price for an American call option is $18.283. (Hint: There is no early exercise. Therefore, a European call would have the same price.)

b. Demonstrate that the binomial option price for a European put option is $5.979. Verify that put-call parity is satis?ed.

c. Confirm that the price of an American put is $6.678.

I only need help on parts B&C.

I need to know the formulas with the binomial tree for the puts.

Please show all steps and formulas, preferably in excel.

Reference no: EM131625317

Questions Cloud

What happens as time to expiration and approaches infinity : Change r from 0 to 0.001. Then repeat a. What happens as time to expiration, T, approaches infinity?

What is the total amount that they are financing : The Williams family is putting down 20% and financing the rest with a home equity loan. What is the total amount that they are financing.

Two companies reveals identical levels of working capital : Your analysis of two companies reveals identical levels of working capital.

How you would estimate the possible loss of earning power : Explain how you would estimate the possible loss of earning power for an employee aged 45 who earns $65,000 a year after taxes

The binomial option price for an american call option : Confirm that the binomial option price for an American call option is $18.283.

Tetra-threat framework for sustainability analysis : Explain why the Tetra-Threat Framework for Sustainability Analysis is important?

Compute the probability of drawing heart-diamond-club : Compute the probability of drawing a heart, diamond, club, and spade in that order.

What is the expected rate of return of this project : What is the expected rate of return of this project?

Grouping expenses by cost center : Laboratory expenses and Laundry expenses are likewise grouped into their own cost centers.

User Account

All Pages