‘At-the-money-forward’ options The stock of ABC Inc. currently trades at $100 and does not pay any dividend. Analysts predict that the price may rise or fall by 10% every 6 months and that the risk-free rate will remain at 5% per annum for all maturities.

(a) Sketch a binomial tree for the evolution of the stock price over the next year.

(b) Calculate the 1-year forward price F of ABC Inc.’s stock.

(c) Calculate the value of a 1-year European call on ABC Inc. with strike F. What about a European put with identical characteristics (underlying, strike, maturity)?

find the cost of your paper

The post Calculate the value of a 1-year European call on ABC Inc. with strike F. appeared first on Best Custom Essay Writing Services | EssayBureau.com.

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *