Week Chapter 培训教程文件.pptVIP

* Pricing the Call Option To price an option with two binomial periods, we work backward through the tree In year 2, since we are at expiration, the option value is max (0, S – K) u = e0.08+0.3 = 1.4623; d = e0.08-0.3 = 0.8025 Stock Price $87.669 $48.114 $26.405 Option Value $47.669 $8.114 $0.000 * Pricing the Call Option (cont’d) We compute the option value using equation (10.3), In year 1 In year 0, Stock Price = $41: similarly, the option value is computed to be $10.737 Stock Price uS dS Cu Cd Option Value $59.954 $87.669 $48.114 $47.669 $8.114 $23.029 $32.903 48.114 $26.405