Context:You need to price a call and a put on a stock using the seven periods binomial model to be coded in excel. Please use the data corresponding to your group from the following table.S X T r u dGroup 2 100 95 4 2% 1.05 0.95
The structure of the assignment is:
Explain how increasing the number of periods make the model more realistic?Explain how the payoffs are calculated at maturity and how the premium at t=0 is obtained? (no need to go into details price by price, just give the overall idea)A Conclusion where you summarize your point of view from how realistic is the binomial and whether it can be used by traders to value options.
The post Statistic Analysis