Consider a European call option on a non dividend paying stock where the stock price is $40,

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Consider a European call option on a non-dividend-paying stock where the stock price is $40,
  • Consider a European call option on a non-dividend-paying stock where the stock price is $40,

  • Answers • 3 pages • 2020
  • Consider a European call option on a non-dividend-paying stock where the stock price is $40, the strike price is $40, the risk-free rate is 4% per annum, the volatility is 30% per annum, and the time to maturity is six months. Calculate , , and for a two step tree Value the option using a two step tree. Verify that DerivaGem gives the same answer Use DerivaGem to value the option with 5, 50, 100, and 500 time steps.
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