01 Apr Assignment-4 Fin 455
1. You are given the following information: (use continuous compounding). Current stock price $100 Strike price $100 Annual Volatility (σ) 25% Annual Risk-Free rate 5% Time to maturity 3 months (0.25 years) Time step (Δt) 1 month (1/12 years) Up parameter (U) Down parameter (D) 1/U Compute the current value of a European call option. 2. A look back option is a...