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Pricing a European Call Option Data Current stock price: $50 Risk-free interest rate: 1% per annum,...

Pricing a European Call Option

  • Data
    • Current stock price: $50
    • Risk-free interest rate: 1% per annum, compounded continuously
    • Volatility: 30% per annum
    • Strike price of a 6-month European call option: $48
  • Question (a)
    • If a Cox-Ross-Rubinstein approach is used, what are the values of u, d, and p that should be used in a two-period binomial tree where each period is 3 months long?

Value of u

Value of d

Value of p

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