Create a 3 period Binomial model on an American Put. Assume S0=$99, X=$100, r=1.0% per...
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Create a 3 period Binomial model on an American Put. Assume S0=$99, X=$100, r=1.0% per period! or 1.01, u = 5.5% (1.055), d = -4.5% (.955), please give the value of an AmericanPUT at each observation (there should be 10!)---but you need to WATCH FOR EARLY EXERCISE! to get this right. If the put is worth below its intrinsic value, you need to use the intrinsic value to calculate the value for the previous period.
Create a 2 period Binomial model on an Call. Assume S0=$49, X=$50, r=.50% per period! or 1.005, u = 3.5% (1.035), d = -1.0% (.99), please give the value of an Call at each observation (there should be 6!)
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