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

Chi square test, application of chi square test in civil engineering

application of chi square test in civil engineering

Latin Square design, what is the the Latin Square design? What is its appli...

what is the the Latin Square design? What is its application in research? please explain this term with very simple but with detailed explanation for effective understanding. I hav

What is the p-value, Use the information given below to find the P-value. ...

Use the information given below to find the P-value. Also, use a 0.05 significance level and state the conclusion about the null hypothesis (reject the null hypothesis or fail to

Vector of a company, Suppose both the Repair record 1978 and Company headqu...

Suppose both the Repair record 1978 and Company headquarters are believed to be significant in explaining the vector (Price, Mileage, Weight). Here, because of the limited sample s

Find the relation between two substance, Find the Relation between two subs...

Find the Relation between two substance: The following table shows the results obtained in experiments aimed to determine how solubility of water in benzene depends on tempera

Probability, .1 Modern hotels and certain establishments make use of an ele...

.1 Modern hotels and certain establishments make use of an electronic door lock system. To open a door an electronic card is inserted into a slot. A green light indicates that the

Assumptions in anova, Assumptions in ANOVA The various populations f...

Assumptions in ANOVA The various populations from which the samples are drawn should be normal and have the same variance. The requirement of normality can be discarded if t

Determine the maximum process variability, You are going to purchase a part...

You are going to purchase a part from a specialty vendor.  Your company needs a C p of at least 1.67 on a critical dimension of the part.  The dimensional specification for this p

Simple linear regression, For each of the following situations choose the s...

For each of the following situations choose the statistical model that you find to be the most appropriate. Justify your choice. a) We are interested in assessing the effects of

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