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
Testing of Hypothesis One objective of sampling theory is Hypothesis Testing. Hypothesis testing begins by making an assumption about the population parameter. Then we gather

We are interested in assessing the effects of temperature (low, medium, and high) and technical configuration on the amount of waste output for a manufacturing plant. Suppose that

Given a certain population there are various ways in which a sample may be drawn from it. The chart below illustrates this point: Figure 1 In  Judgem

Use only the rare event rule, and make subjective estimates to determine whether events are likely. For example, if the claim is that a coin favors heads and sample results consis

(a) If one solves the ordinary differential equation using Euler's method find an expression for the local truncation error. (b) Using the result of (a) above what will

Systematic Sampling In Systematic Sampling each element has an equal chance of being selected, but each sample does not have the same chance of being selected. Here,

JAR 21 SUPPLEMENTAL TYPE CERTIFICATION JAR 21 Part E introduces the need for Supplemental Type Certification when a manufacturer wishes to make major changes to the Type Desig

Statistical Errors              Statistical data are obtained either by measurement or by observation. Hence to think of perfect accuracy is only a delusion or a myth, It is no

what is the use of applied statistic in our daily routin life

The box plot displays the diversity of data for the totexp; the data ranges from 30 being the minimum value and 390 being the maximum value. The box plot is positively skewed at 1.