You are valuing options on SPY. SPY is currently trading at $440 and has volatility...
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You are valuing options on SPY. SPY is currently trading at $440 and has volatility of 20%. You are considering calls and puts with four months until expiration. LIBOR over this period is 6%. Value both a European and an American version of a call option with a strike price of $450. Also value European and American versions of a put option with a strike price of $450. Use a two- subperiod tree as illustrated below
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