financial mathematics

timer Asked: Jan 18th, 2021

Question Description

I'm working on a finance question and need guidance to help me study.

Suppose that a non-dividend paying stock has a value of (100+z)$ today and moves by +/-20% a month. The risk free rate is (3+x)%. (a) Consider a European put option with strike price 104$ and maturity in two months. What would be the lower bound for the option price? (b) Calculate the price of the option using binary trees.



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