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Task
In this assignment, you will solve problems on Binomial Option Pricing.
I
Task
In this assignment, you will solve problems on Binomial Option Pricing.
Instructions
Use your textbook to answer the following questions from Chapter 11:
Exercise 9, 10, and 19.
Please, upload xls, xlsx file.
Please, use the full computing power of Excel.
9. You are given the following data about options: S = 60, K = 60, r = 2%, T = 0.5,
D = 0 (dividends). If the American call is trading at a price of $5, what is the minimum
price of the American put?
10. In the preceding question, refine the lower bound on the American put if there is a
dividend to be received after three months of an amount of $2. Assume that the term
structure is flat and the American call with dividends is worth $6
19. An investor buys a call on ABC stock with a strike price of K and writes a put with
the same strike price and maturity. Assuming the options are European and that there
are no dividends expected during the life of the underlying, how much should such a
portfolio cost?
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