Black bond opt tree bond opt example 25 true

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Unformatted text preview: BINOMIAL TREE PRICE OF EUROPEAN OPTION TO BLACK-SCHOLES PRICE Figure 19.4 in Options, Futures, and Other Derivatives, 7e (and 16.4 in Fundamentals 6e) shows a similar result for an American option Problem 19.30 in Options, Futures and Other Derivatives, 7e (and 16.7 in Fundamentals 6e) is based on this application Stock Price Strike r q vol Remaining Life IsCall IsFut Result 50 50.1 5.00% 0% 40% 1 FALSE FALSE 0 IsAmerican FALSE Convergence 1 8.00 Tree BS 7.50 7.00 6.50 6.00 nSteps 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 Tree ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### BS ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### 5.50 5.00 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 4 2 44 4 6 48 50 nSt e ps PLOTS OF GREEK LETTERS Maturity Strike Int. Rate Volatility IsCall Result S 1 50 5% 25% FALSE 2 Stock Price 50 Int. Rate 5% Volatility 30% IsCall TRUE Result 1 0->Price, 1->Delta, 2->Gamma, 3->Vega, 4->Theta, 5->Rho Result 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 100 ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### Plot of price, d elta, g amma , vega , th eta or rh o vs stock price for Bla ck-Sch oles mod el 12 10 8 6 4 2 0 0 10 20 30 40 50 60 70 80 90 100 0.005 0.01 0.05 0.10 0.15 0.20 0.25 0.30 0.35 0.40 0.45 0.50 0.55 0.60 0.65 0.70 0.75 0.80 0.85 0.90 0.95 1.00 1.25 1.50 1.75 2.00 2.25 2.50 2.75 3.00 3.25 3.50 3.75 4.00 4.25...
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