Using the following criteria, build a 15-period binomial model whose parameters
ID: 2781259 • Letter: U
Question
Using the following criteria, build a 15-period binomial model whose parameters should be calibrated to a Black-Scholes geometric Brownian motion model in order to compute the price of an American call option and an American put option.
Critera: Time (T)= .25 years, Current Price (S0)=$100, Strike Price (K)=$110, Discount Rate (R)=2%, Volatility (Sigma)=30%, Dividend Yield (C)=1%
Note: Have already tried $2.53, $2.58, and $2.56 for American call option price & 12.29, 12.30, and 12.33 for the American put option price.
Explanation / Answer
American Call option:
American Put option:
54.0631887
100 103.948961 108.053865 112.32087 116.756377 121.367041 126.159778 131.141779 136.320517 141.703761 147.299587 153.11639 159.162897 165.448178 171.981662 178.773151 96.2010577 100 103.948961 108.053865 112.32087 116.756377 121.367041 126.159778 131.141779 136.320517 141.703761 147.299587 153.11639 159.162897 165.448178 92.546435 96.2010577 100 103.948961 108.053865 112.32087 116.756377 121.367041 126.159778 131.141779 136.320517 141.703761 147.299587 153.11639 89.0306494 92.546435 96.2010577 100 103.948961 108.053865 112.32087 116.756377 121.367041 126.159778 131.141779 136.320517 141.703761 85.6484264 89.0306494 92.546435 96.2010577 100 103.948961 108.053865 112.32087 116.756377 121.367041 126.159778 131.141779 82.3946921 85.6484264 89.0306494 92.546435 96.2010577 100 103.948961 108.053865 112.32087 116.756377 121.367041 79.2645653 82.3946921 85.6484264 89.0306494 92.546435 96.2010577 100 103.948961 108.053865 112.32087 76.2533502 79.2645653 82.3946921 85.6484264 89.0306494 92.546435 96.2010577 100 103.948961 73.3565294 76.2533502 79.2645653 82.3946921 85.6484264 89.0306494 92.546435 96.2010577 70.5697572 73.3565294 76.2533502 79.2645653 82.3946921 85.6484264 89.0306494 67.8888529 70.5697572 73.3565294 76.2533502 79.2645653 82.3946921 65.3097945 67.8888529 70.5697572 73.3565294 76.2533502 62.8287131 65.3097945 67.8888529 70.5697572 60.4418866 62.8287131 65.3097945 58.1457342 60.4418866 55.9368113 2.60407713 3.75041449 5.30237882 7.34770139 9.96400825 13.2027306 17.0722459 21.5268098 26.4703022 31.781908 37.3600693 43.1609158 49.1932805 55.4663465 61.9896613 68.7731508 1.49346554 2.24696508 3.32123 4.8138546 6.82793349 9.45670778 12.7610765 16.744146 21.3336952 26.3901443 31.7558921 37.3359008 43.1386691 49.1730327 55.4481778 0.76330557 1.20605275 1.8750776 2.86270148 4.28164779 6.25660132 8.90457893 12.3017811 16.4412995 21.2009492 26.3623185 31.729843 37.3116998 43.1163904 0.3341974 0.55767205 0.91799112 1.48773993 2.36810947 3.69130682 5.61403103 8.29317507 11.8336826 16.2066594 21.1713812 26.3344591 31.7037608 0.11757342 0.20841103 0.36575145 0.63447081 1.08573083 1.82806022 3.01807281 4.86317237 7.5982383 11.3999013 16.1754142 21.141779 0.02950846 0.05587626 0.10524603 0.19701776 0.36614173 0.67455962 1.22970527 2.2124584 3.91437298 6.77358022 11.3670413 0.00394245 0.00800813 0.01626658 0.03304161 0.06711601 0.13632988 0.27692107 0.56249795 1.14257807 2.32087004 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Related Questions
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