Draw the binomial tree listing only the option prices at each node. Assume the following data on a 6-month call option, using 3-month intervals as the time period. K = $40, S = $37.90, r = 5.0%, σ = 0.35
1) Draw the binomial tree listing only the option prices at each node. Assume the following data on a 6-month call option, using 3-month intervals as the time period. K = $40, S = $37.90, r = 5.0%, σ = 0.35
2) Draw the binomial tree listing only the stock prices at each node. Assume the following data on a 6-month call option, using 3-month intervals as the time period. K = $70, S = $68.50, r = 6.0%, σ = 0.32
3) Draw the binomial tree listing only the option prices at each node. Assume the following data on a 6-month put option, using 3-month intervals as the time period. K = $40.00, S = $37.90, r = 5.0%, σ = 0.35
4) Using a binomial tree explanation, explain the situation in which an American option would alter the pricing of an option.
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