BinOptBlank

# BinOptBlank - Two Step Binomial Three Date(Two Step...

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Two Step Binomial Page 1 Three Date (Two Step) Binomial Option Pricing (This sheet assumes each step is one year) Time Zero Asset Price  \$50.00  Call Exercise Price  \$50.00  Put Exercise Price  \$50.00  Up Return per step 20% Down Return per step -10% Risk free rate per step 5% Risk neutral probabilities p 0.5 1-p 0.5 Discount factor exp(-r) 0.95 Underlier price dynamics 0 1 2 2 \$72.00 1 \$60.00 0 \$50.00 \$54.00 1 \$45.00 2 \$40.50 Call price dynamics 0 1 2 2 \$22.00 1 \$12.44 0 \$6.87 \$4.00 1 \$1.92 2 \$0.00 Direct calc \$6.87 European Put price dynamics American Put price dynamics 0 1 2 0 1 2 2 \$0.00 2 \$0.00 1 \$0.00 1 \$0.00 0 \$2.11 \$0.00 0 \$2.36 \$0.00 1 \$4.48 1 \$5.00 2 \$9.50 2 \$9.50 Direct calc \$2.11

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Windblown Tree Page 2 Multi Date Binomial Option Pricing Time Zero Asset Price  \$50.00  Option Exercise Price  \$50.00  Time to Expiration (in years) 1.00  Number of steps Sigma 20% Risk free rate per annum 5% Option type -1 Put Initial calculations delta t 0.2 (1 + u) 1.09 (1 + d) 0.91 Risk neutral probabilities p 0.53 Err:508 1-p 0.47 Step-wise discount factor exp(-rdt) 0.99 Stock Price Tree
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