Microsoft PowerPoint - PoF.ppt

Example: (European or American) putƒ 214

Consider a traded asset (stock) with current price S = 50USD, a

put

(European or American)

with E = 55USD, T = 1year, r = 10%p.a., u

= 1.3 and d = 0.77. Determine

the price of the derivative?

Derivative securities: Options - Binomial asset pricing model