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CFA Level 2
Derivatives

Valuation of European Call Option in Binomial Model

Easy Option Valuation Binomial Models

In a one-period binomial model, an investor is considering a European call option on a stock that is currently trading at $50. The stock price can either move up to $60 or down to $40. The risk-free interest rate for the period is 5%. What is the value of the European call option, assuming the option has a strike price of $55?

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