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CFA Level 2
Derivatives

Payoff of a European Call Option in a Binomial Model

Very Easy Option Valuation Binomial Models

A trader is using a one-period binomial model to value a European call option on a stock currently trading at $50. The stock is expected to rise to $60 or fall to $40 in the next period. The strike price of the option is $55. What is the payoff of the call option if the stock rises?

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