Corporate FInance Assignment/ Professional Essay Writers
May 20th, 2020
Consider a multiplicative binomial model with N = 3, r = 0, U = 1.2, d = 0.8 and S O = 100. At time t = 1 when S 1 = 120 a (European) call option with maturity at T = 3 and struck at 100 is quoted at 25. Is that a fair value? If yes explain why? If not explain why and explicitly define an arbitrage strategy (you have to give details of the arbitrage strategy.) Get Finance Help Today