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The current price of stock is 20TRY. The volatility is estimated by using historical data and...

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Finance

The current price of stock is 20TRY. The volatility is estimatedby using historical data and found to be %30. Use at two stepbinomial tree approach to find the value of six month european putoption with strike price of 21TRY. The risk free rate is %10. Wouldyou exercise the option before expiration date if it were anamerican one ?

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3.5 Ratings (644 Votes)
Risk Free Rate factor R11041025 Since we will reach the first node after 3 month upward factor130130 downward factor130070 probability of upward    See Answer
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The current price of stock is 20TRY. The volatility is estimatedby using historical data and found to be %30. Use at two stepbinomial tree approach to find the value of six month european putoption with strike price of 21TRY. The risk free rate is %10. Wouldyou exercise the option before expiration date if it were anamerican one ?

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