An asset’s price is $41.14 and its volatility is 26% per year. A European call on the asset has nine months until expiration, a strike price of $40.00, and the riskfree interest rate is 2.6% per year. According to a twoperiod binomial option pricing model, what is the option’s value?









So Price of call option is $ 5.51. In second page, Cu represents price of call option on upmove. Cd represents price of call option on downmove. P0 represents price of call option.
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