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    tareq tanjim
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    Option price estimation by binomial model

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    Option price estimation by binomial model

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    5 views9 pages

    Binomial Tree

    Uploaded by

    tareq tanjim
    Option price estimation by binomial model

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 9

    Item Value Comment

    Known r 5%
    q 0% dividend yield (foreign interest rate)
    S_0 100
    Model T 3
    sigma 20% Vol F 116.18
    Dt 0.0833 Time Step d1 0.91
    d2 0.56
    Tree setting N(d1) 0.82
    u 1.0594 N(d2) 0.71
    d 0.9439 B 0.86
    a 1.0042 C 26.59
    p 0.5217 P 4.05
    B 0.9958

    Spot tree Step 0 1 2 3 4


    Time - 0.0833 0.1667 0.2500 0.3333

    125.98
    118.91
    112.24 112.24
    105.94 105.94
    100 100.00 100.00
    94.39 94.39
    89.09 89.09
    84.10
    79.38

    6-month European call


    K 105
    Value

    21.85
    15.76
    10.92 9.25
    7.32 5.73
    4.78 3.46 1.95
    2.05 1.02
    0.53 0.00
    0.00
    0.00

    Delta

    1.00
    0.92
    0.77 0.82
    0.61 0.60
    0.46 0.41 0.33
    0.27 0.18
    0.10 0.00
    0.00
    0.00

    6-month European put


    K 105
    Value

    0.00
    0.54
    1.94 1.13
    4.21 3.49
    7.19 6.73 6.08
    10.50 10.32
    14.70 15.03
    19.60
    24.75

    Delta
    0.00
    -0.08
    -0.23 -0.18
    -0.39 -0.40
    -0.54 -0.59 -0.67
    -0.73 -0.82
    -0.90 -1.00
    -1.00
    -1.00
    K 90
    =S*exp((r-q)*T)

    Probability that the standard normal is below d1

    discount for the option


    BSM formula for call
    Use put-call parity to value put

    5 6
    0.4167 0.5000

    141.40
    133.47
    125.98
    118.91
    112.24
    105.94
    100.00
    94.39
    89.09
    84.10
    79.38
    74.93
    70.72
    6-month American call
    K 105
    Value
    36.40
    28.90
    20.98
    14.35
    7.24
    3.76 7.32
    0.00 4.78
    0.00 2.05
    0.00
    0.00
    0.00
    0.00
    0.00

    Delta
    0.00
    1.00
    0.00
    1.00
    0.00
    0.59 0.61
    0.00 0.46
    0.00 0.27
    0.00
    0.00
    0.00
    0.00
    0.00

    6-month American put


    K 105
    Value
    0.00
    0.00
    0.00
    0.00
    0.00
    2.38 4.38
    5.00 7.62
    10.17 11.23
    15.91
    20.47
    25.62
    29.64
    34.28

    Delta
    0.00
    0.00
    0.00
    0.00
    0.00
    -0.41 -0.41
    0.00 -0.59
    -1.00 -0.81
    0.00
    -1.00
    0.00
    -1.00
    0.00
    36.40
    28.90
    21.85 20.98
    15.76 14.35
    10.92 9.25 7.24
    5.73 3.76
    3.46 1.95 0.00
    1.02 0.00
    0.53 0.00 0.00
    0.00 0.00
    0.00 0.00
    0.00
    0.00

    0.00
    1.00
    1.00 0.00
    0.92 1.00
    0.77 0.82 0.00
    0.60 0.59
    0.41 0.33 0.00
    0.18 0.00
    0.10 0.00 0.00
    0.00 0.00
    0.00 0.00
    0.00
    0.00

    0.00
    0.00
    0.00 0.00
    0.54 0.00
    1.99 1.13 0.00
    3.59 2.38
    7.03 6.29 5.00
    10.84 10.61
    15.91 15.91 15.91
    20.90 20.90
    25.62 25.62
    30.07
    34.28

    0.00
    0.00
    0.00 0.00
    -0.08 0.00
    -0.23 -0.18 0.00
    -0.42 -0.41
    -0.63 -0.71 0.00
    -0.88 -1.00
    -0.98 -1.00 0.00
    -1.00 -1.00
    -1.00 0.00
    -1.00
    0.00

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