# Let S0 = \$100, K = \$95, r = 8% (continuously compounded), = 30%, T = 1 year, and n = 3. Verify that the binomial option price for an American call…

1. Let S0 = \$100, K = \$95, r = 8% (continuously compounded), σ = 30%, T = 1 year, and n = 3.
2. a. Verify that the binomial option price for an American call option under the above parameters is\$ 18.283. Verify that there is never early exercise; hence, a European call would have the same price.
3. b. Show that the binomial option price for a European put option is \$5.979. Verify that put-call parity is satisfied.
4. c. Verify that the price of an American put is \$6.678.

The post Let S0 = \$100, K = \$95, r = 8% (continuously compounded), = 30%, T = 1 year, and n = 3. Verify that the binomial option price for an American call… appeared first on Lion Essays.

Let S0 = \$100, K = \$95, r = 8% (continuously compounded), = 30%, T = 1 year, and n = 3. Verify that the binomial option price for an American call… was first posted on May 10, 2023 at 4:28 am.