medium · Quantitative Finance
A stock currently trading at $100 is modeled using a two-step binomial tree over one year (Δ t = 0.5). The volatility is σ = 20% and the risk-free rate is r = 5%.
If the risk-neutral probability p is approximately 0.5539 and the up-factor u is 1.1519, what is the fair value of a one-year European put option with a strike price of $100?
- $10.72
- $4.78
- $4.67
- $5.57
Sign up free to see the explanation and track your rank →
More Quantitative Finance practice
- If the underlying stock price S moves by +$2.00 over a very short interval, what is the es
- What is the estimated OLS slope hatβ?
- If the flat yield curve is at 4% (continuously compounded), what is the bond's price?
- As the number of assets n approaches infinity, what happens to the total portfolio varianc
- What is the fair no-arbitrage price for a six-month (T = 0.5) forward contract?
- If the risk-neutral probability of an up move is p = 0.6 and the risk-free rate is zero, w
- When pricing a 'Digital' (or Binary) call option near expiry with the spot price very clos
- Calculate the price of a zero-coupon bond that pays $1000 in two years, given that the one