Option price binomial tree, Applied Statistics

Assignment Help:

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.


Related Discussions:- Option price binomial tree

Inverse market demand, There are two types of drivers, high-risk drivers wi...

There are two types of drivers, high-risk drivers with an accident probability of 2=3 and low risk drivers with an accident probability of 1=3. In case of an accident the driver su

Active control equivalence studies (aces), Active Control Equivalence Studi...

Active Control Equivalence Studies (ACES) Clinical trials the field in which the object is easy to show that the new treatment is  as good as the existing treatment. Such type

Riemannian integral approximations, Investigate the use of fixed and perce...

Investigate the use of fixed and percentile meshes when applying chi squared goodness-of- t hypothesis tests. Apply the oversmoothing procedure to the LRL data. Compare the res

Quantitative and qualitative methods for forecasting sales, OmegaPlus Pty...

OmegaPlus Pty.Ltd. is a chain of Health Food stores operating in Australia: with 12 stores across Sydney, Melbourne and Brisbane. OmegaPlus has recently appointed a new CEO: San

Linear regression mode, The State Department of Taxation wishes to investig...

The State Department of Taxation wishes to investigate the effect of experience, x, on the amount of time, y, required to fill out Form ST 1040AVG, the state income-averaging form.

Enumerate the set, Grid is the set of pairs {1, 2, 3, 4} x {1, 2, 3, 4}. ...

Grid is the set of pairs {1, 2, 3, 4} x {1, 2, 3, 4}. Image is the power set of Grid. An element of Image is a subset of Grid and can be represented by a diagram on a 4 by 4

., differance b/w big M mathod and two phase mathod

differance b/w big M mathod and two phase mathod

What are the charateristics of a population for which, what are characteris...

what are characteristics of a population for which it would be appropiate to use mean/median/mode

Assignment, wants to complete assignment for uk university which i need toy...

wants to complete assignment for uk university which i need toy submit latest by 10th october

Atmospheric circulation and precipitation, (a) Elevation (m)...

(a) Elevation (m) 0 400 800 1200 1600 2000 2400 2800 3200 4000 480

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