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Value of option using cox-ross-rubenstein

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Reference no: EM133110136

Consider a 6-month European put option with strike price of $2050 on a stock index if the current index value is $2000. The dividends paid by the stock included in the index can be approximated by a continuously compounded dividend yield of 10%. The risk-free interest rate is 8%. The standard deviation of the index price appreciation is SD=30%.

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

Reference no: EM133110136

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