Binomial and continuous model, Applied Statistics

Assignment Help:

Exercise: (Binomial and Continuous Model.) Consider a binomial model of a risky asset with the parameters r = 0:06, u = 0:059, d =  0:0562, S0 = 100, T = 1, 4t = 1=12. Note that u and d are monthly e ective rates of return and r is the annual e ective risk-free interest rate.

Determine the price of a European put option with strike price X = 98 on the above non-dividend paying asset at time 0 and nd x(1); y(1), i.e., the number of shares of the stock and risk-free asset needed at time 0 to replicate the European option over the rst time-step.


Related Discussions:- Binomial and continuous model

Mode, Mode The mode is the value which occurs most frequ...

Mode The mode is the value which occurs most frequently in a set of observations on the point of maximum frequency and around which other items of the set cluste

Age at first marrage, get a questionnaire that captured age at first marria...

get a questionnaire that captured age at first marriage

HLT 362, What is an interaction? Describe an example and identify the varia...

What is an interaction? Describe an example and identify the variables within your population (work, social, academic, etc.) for which you might expect interactions?

Mean and median, The amounts of money won by the top ten finishers in a fam...

The amounts of money won by the top ten finishers in a famous car race are listed below. $1,172,246    $163,659    $440,584    $350,634     $290,596 $186,731    $145,809     $143,2

Describe the opportunities for statistical learning, 1. Recognize and expla...

1. Recognize and explain the opportunities for statistical learning. 2. Describe how the use of statistics supports student learning. 3. Recognize appropriate data displays a

the npv of the book , Bill Clinton reportedly was paid $10 million to writ...

Bill Clinton reportedly was paid $10 million to write his book My Way. The book took three years to write. In the time he spent writing, Clinton could have been paid to make speech

#regression, #regression line drawn as Y=C+1075x, when x was 2, and y was 2...

#regression line drawn as Y=C+1075x, when x was 2, and y was 239, given that y intercept was 11. calculate the residual

Cluster sampling, Cluster Sampling This method is also known as multi s...

Cluster Sampling This method is also known as multi stage sampling .Under this method random selection is made of the ultimate or final units from a given stratum. The sampling

Enumerate the set, Grid is the set of pairs {1, 2, 3, 4} x {1, 2, 3, 4}. ...

Grid is the set of pairs {1, 2, 3, 4} x {1, 2, 3, 4}. Image is the power set of Grid. An element of Image is a subset of Grid and can be represented by a diagram on a 4 by 4

Sampling error , Sampling Error  It is the difference between the value...

Sampling Error  It is the difference between the value of the actual population parameter and the sample statistic. Samples are used to arrive at conclusions regarding the p

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd