Determine the price of the option if it is american

Reference no: EM131237197

Consider a put option on a non-dividend-paying stock when the stock price is $40, the strike price is $42, the risk-free interest rate is 2%, the volatility is 25% per annum, and the time to maturity is three months. Use DerivaGem to determine the following:

(a) The price of the option if it is European (use Analytic: European).

(b) The price of the option if it is American (use Binomial: American with 100 tree steps)

2197_Figure 9.jpg

Reference no: EM131237197

Questions Cloud

What are the differences in the financing sources : What are the differences in the financing sources from smaller to the larger FI? In your opinion, could we consider various REITs as being a part of the mutual funds industry?

Which of these skills and qualities do you possess : Assess yourself. Which of these skills and qualities do you possess? Where did you develop them? If you don't have that skill or quality, what else do you offer that is related?

Why is lightning seen before thunder is heard : Does doubling the decibels of a sound intensity level double the intensity? Explain. Why is lightning seen before thunder is heard? Under what circumstances would sound have (a) a Doppler "blueshift" and (b) a Doppler "redshift"?

List the four assumptions of indifference curves : List the four assumptions of indifference curves. If a consumer goes the grocery store to buy 5 pound potato and find 10 pound potato bag $1.99 and 5 pound potato bag is also for $1.99.

Determine the price of the option if it is american : Determine the price of the option if it is European. - Determine the price of the option if it is American. (use Binomial: American with 100 tree steps).

Briefly describe the municipalitys demographics : Briefly describe the municipality's demographics. Evaluate the previous three-year trend of the municipality's major revenue sources and expenditures. Analyze impact of issues contributing to the municipality's budget deficiencies.

What is the effect when a system is driven in resonance : How is the wavelength of sound affected when (a) a sound source moves toward a stationary observer, and (b) the observer moves away from a stationary sound source? What is the effect when a system is driven in resonance? Is a particular frequency ..

Analysis and design of information systems development : CSE2ISD - Information Systems Development - Object-Oriented Analysis and Design for ISD - Apply object-oriented methodology for analysis and design of information systems development in a case study.

Discarded fraction using probability binomial theorem : Discarded Fraction using Probability Binomial Theorem? Write Matlab code for Discarded Fraction using Manual Method? Comparison of Graphs of both Methods using hold on command:

User Account

All Pages