hard · Quantitative Finance derivatives
A stock is currently trading at S = 100. Using a two-step binomial tree to price a 1-year European call option with a strike of K = 100, assume an annualized volatility of σ = 20% and a risk-free rate of r = 5%.
If the time step is Δ t = 0.5, what is the fair price of this call option today?
- $10.22
- $9.54
- $11.15
- $9.78
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