question archive Given a American put option, use a binomial tree with monthly steps h=1/12 that is step length
Given a American put option, use a binomial tree with monthly steps h=1/12 that is step length
Subject:FinancePrice: Bought3
Given a American put option, use a binomial tree with monthly steps h=1/12 that is step length.
Let S(0) =100 (Stock price)
K= 110 (Strike price)
r= 0.03 (Risk free-rate)
T=1 (year)
Volatility= 20%.
a) Constructing a binomial tree? ( already know the answer.)
I want help with b):
b) We have the same parameters but the share has a known dividend yield of 5% which will be paid out in 0.6 years. Calculate the price of the option by making a binomial tree with monthly steps?
