Chapter 11

Task 

In this assignment, you will solve problems on Binomial Option Pricing. 

Instructions 

  1. Use your textbook to answer the following questions from Chapter 11:
    1. Exercise 9, 10, and 19.
  2. Please, upload xls, xlsx file.
  3. Please, use the full computing power of Excel.

9.   You are given the following data about options: S = 60, K = 60, r = 2%, T = 0.5,

D = 0 (dividends). If the American call is trading at a price of $5, what is the minimum

price of the American put?

10.  In the preceding question, refine the lower bound on the American put if there is a

dividend to be received after three months of an amount of $2. Assume that the term

structure is flat and the American call with dividends is worth $6

19.   An investor buys a call on ABC stock with a strike price of K and writes a put with

the same strike price and maturity. Assuming the options are European and that there

are no dividends expected during the life of the underlying, how much should such a

portfolio cost?

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