hard · Quantitative Finance
Consider a two-step binomial tree for a stock starting at $100. In each step, the stock can go up by a factor of u = 1.1 or down by d = 0.9.
If the risk-neutral probability of an up move is p = 0.6 and the risk-free rate is zero, what is the price of a European call option with a strike of $100?
- $4.32
- $10.00
- $12.60
- $7.56
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