Binomial and continuous model, Applied Statistics

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.

Posted Date: 3/9/2013 1:04:05 AM | Location : United States

Related Discussions:- Binomial and continuous model, Assignment Help, Ask Question on Binomial and continuous model, Get Answer, Expert's Help, Binomial and continuous model Discussions

Write discussion on Binomial and continuous model
Your posts are moderated
Related Questions
Question 1 Suppose that you have 150 observations on production (yt) and investment (it), and you have estimated the following ADL(3,2) model: (1 – 0.5L – 0.1L2 – 0.05L3)yt = 0.7

Replacement times for TV sets are normally distributed with a mean of 8.2 years and a standard deviation of 1.1 years. Find the replacement time that separates the top 20% from the

Large Sample Test for Mean A random sample of size n (n > 30) has a sample mean    . To test the hypothesis that the population mean μ has a specified value  μ 0  let us formu

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

A marketing research firm was engaged by an automobile manufacturer to conduct a pilot study to examine the feasibility of using logistic regression for ascertaining the likelihood

The Null Hypothesis - H0: β0 = 0, H0: β 1 = 0, H0: β 2 = 0, Β i = 0 The Alternative Hypothesis - H1: β0 ≠ 0, H0: β 1 ≠ 0, H0: β 2 ≠ 0, Β i ≠ 0      i =0, 1, 2, 3

What does the confidence level of a confidence interval tell you? Suppose that a population has mean, µ, and standard deviation, σ.  What does the central limit theorem tell us

There are 15 types of ice cream: A,B,C,D,E,F,G,H,I,J,K,L,M,N, and O. How many combinations are there to sample 5 flavors if you sample 1 flavor 4 times? How many combinations are t

(a) Elevation (m) 0 400 800 1200 1600 2000 2400 2800 3200 4000 480