Homework answers / question archive / Use DerivaGem to calculate the value of an American put option on a non-dividend-paying stock when the stock price is $40, the strike price is $42, the risk-free rate is 5%, the volatility is 35%, and the time to maturity is 1

Use DerivaGem to calculate the value of an American put option on a non-dividend-paying stock when the stock price is $40, the strike price is $42, the risk-free rate is 5%, the volatility is 35%, and the time to maturity is 1

Finance

Share With

Use DerivaGem to calculate the value of an American put option on a non-dividend-paying stock when the stock price is $40, the strike price is $42, the risk-free rate is 5%, the volatility is 35%, and the time to maturity is 1.5 years. (Choose Binomial American for the “option type” and 50 timesteps.)

a. Using a trial and error approach calculate how low the stock price would have to be for the

time value of the option to be zero.