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    mayo1565's Avatar
    mayo1565 Posts: 2, Reputation: 1
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    #1

    Apr 15, 2014, 09:18 PM
    Binomial Option Pricing
    [SIZE=3](a) What is the price of an American-style call option assuming a 4% annual risk-free drift, a strike price = $150, and 3 years to maturity. In each year the price can either rise by a factor of 1.3 or fall by a factor of 0.9. The current price of the underlying asset is $100 and it pays no dividends.
    (b) Why is the price in part (a) different than you would get from inputting a 10% drift and 20% volatility into the Black Scholes equation?
    (c) What would be the price of an American-style put option on the same stock with the same maturity as in part (a) above?
    [/SIZE]
    ma0641's Avatar
    ma0641 Posts: 15,675, Reputation: 1012
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    #2

    Apr 16, 2014, 11:38 AM
    No homework help without you trying first.
    smoothy's Avatar
    smoothy Posts: 25,492, Reputation: 2853
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    #3

    Apr 16, 2014, 11:39 AM
    Show the work first... its the site rules.
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