question archive A non-dividend paying stock currently trades for$50 and has an annualised return volatility (Standard deviation) of 20%
A non-dividend paying stock currently trades for$50 and has an annualised return volatility (Standard deviation) of 20%
Subject:FinancePrice:2.86 Bought3
A non-dividend paying stock currently trades for$50 and has an annualised return volatility (Standard deviation) of 20%. Given that the continuously compounded risk-free rate of return is 4% p.a.
Using a two-step binomial tree, price the European put option on the stock when the put has an exercise price of $55 and 3 months to maturity.
