A stock price is currently 40 it is knows that at the end, Ask an Expert

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A stock price is currently $40. It is knows that at the end of six month, it will be either $50 or $30. The risk-free rate of interest with continuous compounding is 8% per annum.

Calculate the value of a four-month European call option on the stock with an exercise price of $42, using binomial model and

(a) no-arbitrage argument, and

(b) risk-neutral valuation approach.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92745822

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