Value of European Call Option Assignment | Homework For You
June 8th, 2020
Alpha Tunis LLC, a newly publicly listed company in San Diego, is currently valued at $75. Over the next two six-month periods, analysts forecast it will go up by 10% or down by 10%. The current risk free rate is 8% per year. Given that the current exercise price is $80, based on the Binomial Option Pricing model,

(i) Estimate the value of one-year European call option. Clearly show the binomial trees as part of your calculations.
(ii) Estimate the value of one-year European put option. Clearly show the binomial trees as part of your calculations.
(iii) Demonstrate if the Put-Call parity hypothesis holds. Clearly show your workings. Please use 4 decimal places in your workings.Get Finance homework help today