Loading...
CFA Level 2
Derivatives

Expected Value of Call Option using Binomial Model

Very Easy Option Valuation Binomial Models

In the context of option valuation using the binomial model, consider a stock currently trading at $50. The model defines two potential price movements for the stock over one time period: it can increase by 20% or decrease by 10%. Assuming a risk-free rate of 5%, what will be the expected value of a European call option with a strike price of $55 at the end of this period?

Hint

Submitted3.0K
Correct2.4K
% Correct80%