Purchase Solution

Binomial tree for currency put option

Not what you're looking for?

Ask Custom Question

An American put option to sell a swiss franc for dollars has a strike price of $0.80 and a time to maturity of one year. The volatility of the swiss franc is 10%, the dollar interest rate is 6%, the swiss franc interest rate is 3%, and the current exchange rate is 0.81. Use a tree with three time steps to value the option. Estimate the delta of the option from your tree.

Problem from 'Option, Futures and Other Derivatives, by John C. Hull' 6th. Edition, 2006.

Purchase this Solution
Solution Summary

The solution calculates the value of the put option and the delta of the put option using Binomial tree with three time steps (see attachment in Excel file for full details and figures).

Purchase this Solution
Free BrainMass Quizzes
Terms and Definitions for Statistics

This quiz covers basic terms and definitions of statistics.

Measures of Central Tendency

Tests knowledge of the three main measures of central tendency, including some simple calculation questions.

Measures of Central Tendency

This quiz evaluates the students understanding of the measures of central tendency seen in statistics. This quiz is specifically designed to incorporate the measures of central tendency as they relate to psychological research.

Know Your Statistical Concepts

Each question is a choice-summary multiple choice question that presents you with a statistical concept and then 4 numbered statements. You must decide which (if any) of the numbered statements is/are true as they relate to the statistical concept.

View More Free Quizzes
Related BrainMass Solutions

  • Pricing Options on Binomial Tree

    326882 Pricing Options on Binomial Tree I'm trying to answer the questions about the two period binomial tree pasted here. Thanks for your help!!

  • Option Valuation- American Put Option using Binomial Tree

    What is the value of a 6-month American put option with a strike price of $51? Please see the attached file. Values an American put option using binomial tree are provided in the solution.

  • Option Pricing using Binomial Model

    Verify that put/call parity holds. Can you help me get started with this assignment? ** Please see attached Excel file for answers. ** Answers are on different worksheets. Find the value of an European call option using Binomial tree.

  • 4-Step Binomial Model

    See attached file The solution calculates the value of European call option using Binomial tree.

  • Black-Scholes Formula Price

    ., spreadsheets) of the binomial stock price and option price trees for binomial tree approximations in increments of steps no more than 50.

  • Valuing Options using Binomial tree

    Please see attached file Values a call option using a two-step Binomial tree.

  • Valuing option using Binomial Tree

    Q1: Calculate u, d, and p for a two-step tree. Hint: if the expiration is six months and there are two steps, then the length of each time step delta t ) is 3 months (=0.25). Q2: Value the option using a two-step tree.

  • Call Option valuation using Binomial tree

    a) Calculate u, d, and p for a two-step tree b) Value the option using a two-step tree. Please see attached file. A call option's value has been calculated using Binomial Tree.

  • Binomial Option Pricing and Black - Scholes Model

    Four option trees: there should be only two unique formulas for each option tree: one formula for all leaf nodes and one formula for all non-leaf nodes.

View More Related Solutions