A stock price is currently $50. Over each of the next two three-month periods it is expected to go up by 6% or down by 5%. The risk-free interest rate is 9% per annum with continuous compounding. What is the value of a six-month European call option with a strike price of $46?
*Equations you may find helpful:
p = (e^(rΔt)-d) / (u-d)
f = e^(-rΔt) * (fu*p + fd*(1-p))
(required precision 0.01 +/- 0.01)
Looking for a Similar Assignment? Order now and Get 20% Discount! Use Code GET20