Option price binomial tree, Applied Statistics

Modify your formulas from (1) to compute the price at time 0 of an American put option with the same contract speci cations in the binomial model. Report the price of the American put option under the binomial model.

Compute x(1); y(1) i.e., the number of shares of the stock and risk-free asset needed at time 0 to replicate the American option over the rst time-step.

Identify which nodes (if any) prior to the terminal date T = 1 are optimal exercise points. In other words, identify the points on the binomial tree, if any, where early exercise is optimal. It is enough to simply highlight these nodes on a visual representation of the stock or option price binomial tree.

Report the early exercise premium for the American put option, i.e., compute PA PE. This is the cash value associated with the ability to exercise early.

Posted Date: 3/9/2013 1:05:03 AM | Location : United States







Related Discussions:- Option price binomial tree, Assignment Help, Ask Question on Option price binomial tree, Get Answer, Expert's Help, Option price binomial tree Discussions

Write discussion on Option price binomial tree
Your posts are moderated
Related Questions
Multi stage or Cluster Random sampling  Under this method, the random selection is made of primary, intermediate and final units from a given population. The area of investigat

Ten balls are put in 6 slots at random.Then expected total number of balls in the two extreme slots

Pneumatic Actuator Design Matrix: The range of actuator design parameters have been provisionally assessed and are presented in Table. You are required to determine the following

The investor has constant wealth 1 and is o?ered to invest in shares of a project that either gains 3=2 or loses 1 with equal probabilities. Therefore, if the investor obtains sha

Prediction Inte rval We would like to construct a prediction interval around    which would contain the actual Y. If n  ≥  30,     ± Zs e  would be the interval, where Z

Sequential Sampling Under this method, a number of sample lots are drawn one after another from a universe depending on the results of the earlier samples. Such sampling is gen

#regression line drawn as Y=C+1075x, when x was 2, and y was 239, given that y intercept was 11. calculate the residual

Types of cost-reimbursable contracts are:   Cost Plus Fixed Fee contract (CPPF): Compensation is based on a fixed sum independent of the final project cost. The customer a

The proportion of American Express credit-card holders who pay their credit card bill in full each month is 23%; the other 77% make only a partial or no payment. (a) In a random

Rank Correlation Sometimes the characteristics whose possible correlation is being investigated, cannot be measured but individuals can only be ranked on the basis of the chara