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CFA Level 2
Derivatives

European Call Option Valuation using Binomial Model

Easy Option Valuation Binomial Models

A bank is evaluating an investment in a European call option on a stock using a binomial model for option pricing. The current stock price is $50, the exercise price of the option is $55, and the stock is expected to move to either $60 or $45 in the next period. Assume a risk-free interest rate of 5% per period. What is the value of the call option using the binomial model?

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