Binomial Model

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Binomial Model

Postby naresh.thkr » Wed Oct 31, 2012 9:31 pm


Can we solve this question in any other way than normal one through Binomial model which is quite lengthy:

Q. The stock price is currently $ 80. The stock price annual up move factor is 1.15. The risk free rate is 3.00%. The value of a 2 year European call option with an exercise price of $ 62 using a two step binomial model is closest to:

A. $ 0.00
B. $ 18.00
C. $ 23.07
D. $ 24.92


Finance Junkie
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Re: Binomial Model

Postby swarnendupathak » Thu Nov 01, 2012 9:27 am

I think Binomial Model is the only option here, had the PUT price was mentioned, then we could have used Put-Call Parity.

If there is any other method then please post it...


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Posts: 356
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Re: Binomial Model

Postby content.pristine » Thu Nov 01, 2012 1:43 pm

I'm afraid so, Swarnendu is correct.. ;)
You do need to use the binomial method here.. :roll:
Sorry.. :?


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