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Unformatted text preview: ACTSC/STAT 446/846 – Assignment 2 – Due on November 3 at 1:00pm Note: A drop-box on UW-ACE will be created where you can hand in your assignment. (Option a: electronic-only submission): Hand in one main document with all your answers as well as any ﬁles used in your calculations (e.g., Excel spreadsheet). Make sure your answers are clearly identiﬁed so that they can easily be found. (Option b: paper submission) If you hand in a paper version of your assignment, you must still hand in your Excel spreadsheet in the DropBox. It is thus not necessary to print all your Excel calculations. 1. Binomial Model (computer-based: use Excel or some other software) [10pts] Using a binomial tree with n = 8 time steps, S (0) = 100, expiration of 1 year (and therefore h = 1 / 8), r = 5%, σ = 0 . 3 and δ = 3 . 5%. (a) Compute European and American put option prices for K = 90 , 110. (b) Compute European and American call option prices for K = 90 , 110. (c) Repeat (a) and (b) but assuming that δ...
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- Spring '09
- $1, σ, $23, lower-bound