Corporate Finance
3rd Edition
ISBN: 9780132992473
Author: Jonathan Berk, Peter DeMarzo
Publisher: Prentice Hall
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Textbook Question
Chapter 21.1, Problem 2CC
Why don’t we need to know the probabilities of the states in the binominal tree in order to solve for the price of the option?
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What is the purpose of the Black–Scholes Option Pricing Model?
Compare the binomial and Black-Scholes option pricing models. What are their differences and similarities? In what circumstances would you prefer one versus the other? Support your arguments using references.
Compare the binomial and Black-Scholes option pricing models. What are their differences and similarities? In what circumstances would you prefer one versus the other?
Use real market data as well as academic references.
Chapter 21 Solutions
Corporate Finance
Ch. 21.1 - What is the key assumption of the binomial option...Ch. 21.1 - Why dont we need to know the probabilities of the...Ch. 21.1 - Prob. 3CCCh. 21.2 - What are the inputs of the Black-Scholes option...Ch. 21.2 - What is the implied volatility of a stock?Ch. 21.2 - How does the delta of a call option change as the...Ch. 21.3 - What are risk-neutral probabilities? How can they...Ch. 21.3 - Does the binominal model or Black-Scholes model...Ch. 21.4 - Is the beta of a call greater or smaller than the...Ch. 21.4 - What is the leverage ratio of a call?
Ch. 21.5 - Prob. 1CCCh. 21.5 - The fact that equity is a call option on the firms...Ch. 21 - The current price of Estelle Corporation stock is...Ch. 21 - Using the information in Problem 1, use the...Ch. 21 - Suppose the option in Example 21.11 actually sold...Ch. 21 - Eagletrons current stock price is 10. Suppose that...Ch. 21 - What is the highest possible value for the delta...Ch. 21 - Hema Corp. is an all equity firm with a current...Ch. 21 - Consider the setting of Problem 9. Suppose that in...Ch. 21 - Roslin Robotics stock has a volatility of 30% and...Ch. 21 - Rebecca is interested in purchasing a European...Ch. 21 - Using the data in Table 21.1, compare the price on...Ch. 21 - Consider again the at-the-money call option on...Ch. 21 - Harbin Manufacturing has 10 million shares...Ch. 21 - Using the information on Harbin Manufacturing in...Ch. 21 - Using the information in Problem 1, calculate the...Ch. 21 - Prob. 23PCh. 21 - Prob. 24PCh. 21 - Calculate the beta of the January 2010 9 call...Ch. 21 - Consider the March 2010 5 put option on JetBlue...
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- What are the assumptions of Option-pricing models?arrow_forwardIt's acceptable to use the Black-Scholes formula or binomial trees to value real options,even though the options are not traded.Do you agree with this statement?What is the key assumption of the valuation method?arrow_forward4. If the market price for an option is lower than what the value is from using the binomial model what would you do?arrow_forward
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