binomial-trees

Hi David, Just needed to clarify that the volatility parameter in the following is extraneous to the problem: Below is the two-step binomial for a European call option. Assumptions are: Current asset price = $20, Strike = $21, Time = six months, Volatility = 19%, Riskless rate = 12%, and...

Hi David, Wanted to bring to your attention some errors in the referenced above. Hull's Example 12.8 Two-step European put option, with up and down simply given as inputs. In this way, volatility does not inform up and down and, consequently, this model does not implicitly assume lognormal...

Topic: Computing call option using 2-period binomial trees David: If a question on this topic says: ".A stock is priced at 40 and the periodic risk-free rate of interest is 8 percent. What is the value of a two-period European call option with a strike price of 37 on a share of stock using...