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A stock price is currently $50. It is knows that at the end of six month, it will be either $55 or $35. The risk-free rate of interest with continuous compounding is 6% per annum. Calculate the value of a three-month European call option on the stock with an exercise price of $48, 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.:- M91622601

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