• C++ Programming for Financial Engineering
    Highly recommended by thousands of MFE students. Covers essential C++ topics with applications to financial engineering. Learn more Join!
    Python for Finance with Intro to Data Science
    Gain practical understanding of Python to read, understand, and write professional Python code for your first day on the job. Learn more Join!
    An Intuition-Based Options Primer for FE
    Ideal for entry level positions interviews and graduate studies, specializing in options trading arbitrage and options valuation models. Learn more Join!

Replication :-)

pardasani

pardasani

Joined
8/20/06
Messages
115
Points
28
Here is a cute little problem -

Assume you have a stock, currently trading at S=100.... Consider a perpectual (no maturity) american binary option that pays you $1 if the stock ever crosses 150... i.e. as soon as the stock crosses 150, you exercise and you get 1$

historical mu=10% per annum, historical vol=25% per annum and r=0

How much is the option worth ?

sp
 
I believe this is question 3.3 from TFCrack's book. A very good exercise, nonetheless :)
 
Back
Top