current stock price-$100, over the next two 6 month periods it will go up by 8% or down by 5%.
the risk free interest rate is 8% per annum with continuous compounding.
a) what is the value of a one year european call option with a strike price of $104.?
b) what is the value of a one year european put option with a strike price of $104?
c) verify that the european call and put prices satisfy the put-call parity.
the risk free interest rate is 8% per annum with continuous compounding.
a) what is the value of a one year european call option with a strike price of $104.?
b) what is the value of a one year european put option with a strike price of $104?
c) verify that the european call and put prices satisfy the put-call parity.