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    Call Option valuation using Binomial tree

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    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 9, 2019, 9:23 pm ad1c9bdddf
    https://brainmass.com/economics/international-economics/call-option-valuation-using-binomial-tree-183144

    Solution Summary

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

    $2.19