Explore BrainMass

Explore BrainMass

    Call Option valuation using Binomial tree

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    A European Call Option on a non-dividend-paying stock where the stock price is $40, the strike price is $40, the risk-free rate is 4% per annum, the volatility is 30% per annum, and the time to maturity is 6-mo.

    a) Calculate u, d, and p for a two-step tree

    b) Value the option using a two-step tree.

    © BrainMass Inc. brainmass.com October 1, 2020, 9:33 pm ad1c9bdddf

    Solution Summary

    A call option's value has been calculated using Binomial Tree.