Consider a European call option on a non-dividend-paying stock where the stock price is
$ 5.00
Consider a European call option on a non-dividend-paying stock where the stock price is $40, the strike price is $40, the risk-free rate is 4% per annum, the volatility is 30% per annum, and the time to maturity is six months.
- Calculate
,
, and
for a two step tree
- Value the option using a two step tree.
- Verify that DerivaGem gives the same answer
Use DerivaGem to value the option with 5, 50, 100, and 500 time steps.
Category: Accounting, General Accounting
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