tobinomialtrees(金融工程-华东师范大学汤银才).pptVIP

Introduction toBinomial TreesChapter 9 A Simple Binomial Modelof Stock Price Movements In a binomial model, the stock price at the BEGINNING of a period can lead to only 2 stock prices at the END of that period Option Pricing Based on the Assumption of No Arbitrage Opportunities Procedures: ? Establish a portfolio of stock and option ? Value the Portfolio no arbitrage opportunities no uncertainty at maturity no risk with the portfolio risk-free interest earned Value the option Risk-free interest = value of portfolio today A Simple Binomial Model:Example A stock price is currently $20 In three months it will be either $22 or $18 A Call Option A 3-month call option on the stock has a strike price of $21. Figure 9.1 (P.202) Setting Up a Riskless Portfolio Consider the Portfolio: LONG D shares SHORT 1 call option Figure 9.1 becomes Portfolio is riskless when 22D – 1 = 18D or D = 0.25 Valuing the Portfolio( with Risk-Free Rate 12% ) The riskless portfolio is: LONG 0.25 shares SHORT 1 call option The value of the portfolio in 3 months is 22 * 0.25 - 1 = 4.50 = 18 * 0.25 The value of the portfolio today is 4.50e-0.12*0.25=4.3670 Valuing the Option The portfolio that is: LONG 0.25 shares SHORT 1 call option is worth 4.367 The value of the shares is 5.000 = 0.25 * 20 The value of the option is therefore 0.633 = 5.000 - 4.367 Generalization Consider a derivative that lasts for time T and that is dependent on a stock Figure 9.2 (P.203) Generalization (continued) Consider the portfolio that is: LONG ? shares SHORT 1 derivative Figure 9.2 becomes The portfolio is riskless when S0uD – ?u = S0d D – ?d or when Generalization (continued) Value of the portfolio at time T is  S0u D – ?u Value of the portfolio today is  (S0u D – ?u )e–rT Another expression for the portfolio value today is S0 D – f He