Question call option price is 583 after each period there, Ask an Expert

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Question: Call option price is $5.83. After each period, there is a 40% chance for the stock price to go up, 25% chance to stay the same, and 35% chance to go down. Assume µ is the same as the risk-free rate.

(a) Find the up-factor u and down-factor d = 1/u

(b) Find the corresponding risk-neutral probabilities q1, q2, q3 for the u and d above.

current price is S(o)=$60.

1 month = 1 period.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M92790870

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