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CFA Level 2
Derivatives

European Call Option Valuation in Binomial Model

Medium Option Valuation Binomial Models

In a one-period binomial model, an investor is considering an option for a stock currently priced at $50. The stock is expected to either increase to $60 or decrease to $40 at the end of the period. The risk-free rate for the period is 5%. Using the binomial option pricing model, what is the value of a European call option with a strike price of $55?

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