(Answered)-The spot price of a stock is $50 and the futures contract is on - (2025 Updated Original AI-Free Solution

Discipline:

Type of Paper:

Academic Level: Undergrad. (yrs 3-4)

Paper Format: APA

Pages: 5 Words: 1375

Buy For $11.00 Order Custom Paper

Buy For $11.00

Question

The spot price of a stock is $50 and the futures contract is on 100 shares. What is the price of a 9-month American put on this futures contract if the strike is $5,300? The monthly volatility of the futures price is 9%. The risk free rate is 8% per annum continuous. Use a 3-step binomial model.