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Calculate u, d and p when a binomial tree is constructed to value an option on...

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Finance

Calculate u, d and p when a binomial tree is constructed tovalue an option on a foreign currency. The tree step size is onemonth, the domestic interest rate is 0.50% per annum, the foreigninterest rate is 0.10% per annum, and the volatility is 12% perannum.
Use a three step binomial tree to value a 3m European calloption on EUR/USD when spot is 1.08 $ per €, strike is 1.10 $ per€.

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t The tree step size one month 112 yearthe domestic interest rate rd 050 per annumthe foreign interest rate rf 010 per annumand the volatility 12 per annumUse a three step binomial tree to    See Answer
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Calculate u, d and p when a binomial tree is constructed tovalue an option on a foreign currency. The tree step size is onemonth, the domestic interest rate is 0.50% per annum, the foreigninterest rate is 0.10% per annum, and the volatility is 12% perannum.Use a three step binomial tree to value a 3m European calloption on EUR/USD when spot is 1.08 $ per €, strike is 1.10 $ per€.

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