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What behavioural and market factors would justify

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Question - Suppose the price of a commodity is £100. The strike prices of call and put options trading on the commodity are £100. These options mature in 24 months. The discount risk-free rate is 8% per annum. The risk-neutral binomial analysis with a time step of 12 months of a European call option produces an option value of 22.29. What behavioural and market factors would justify a binomial option value of 15.68 for the call option? Explain.

Reference no: EM133028144

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