Chapter 03 · Section 3.1

Binomial Pricing Question 8

The diagram of the stock price evolution develops in this direction ------>
<--------The diagram of the call value evolution develops in this direction.

What is the price of the call?

a) --999999/-1
b) -40.41
• c) -10
  No. You have subtracted the stock price from the exercise price, but in our hypothesis, we stated that the stock price was not going to be equal to (stock - exercise) at the end of the period.
  d) +36.73

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