two-step-binomial

In a two period binomial model, and assume that the option being valued is 6 months, with std deviation is 8 percent. For the initial up factor calculation the formula is Exp 0.08 srt .025. My question is why was time not calculated as .5, as this a 6 month call option? The up factor period...

Learning objectives: Calculate the value of an American and a European call or put option using a one-step and two-step binomial model. Describe how volatility is captured in the binomial model. Questions: 811.1 Consider a six-month at-the-money (ATM) European call option on a...