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What is the risk-neutral probability

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Consider a three-period ( t = 0,1, 2, 3 ) binomial option pricing model. There are 3-period put options on the stock. The values of the underlying variables are S = $50, n = 3, K = $48, u =1.1, d = 0.9, r =1.02 (a) what is the risk-neutral probability that a put option will be in-the-money on maturity date? (b) What is the price of a European put option today? (c) What is the price of an American put option today? (d) What is the dollar value of premature exercise for the American put option?

Reference no: EM13727165

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