Mathematical Foundations for Finance Exercise 6 Martin Stefanik - - PowerPoint PPT Presentation

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Dec 22, 2022 118 likes •196 views

Mathematical Foundations for Finance Exercise 6 Martin Stefanik ETH Zurich European Call Price in the Binomial Model 1 / 4 2.0 Option price Option payoff 1.5 Option price 1.0 0.5 0.0 9 10 11 12 13 Initial stock price European Put

SLIDE 1

Mathematical Foundations for Finance Exercise 6

Martin Stefanik ETH Zurich

SLIDE 2

European Call Price in the Binomial Model

9 10 11 12 13 0.0 0.5 1.0 1.5 2.0 Initial stock price Option price Option price Option payoff

1 / 4

SLIDE 3

European Put Price in the Binomial Model

9 10 11 12 13 0.0 0.5 1.0 1.5 2.0 Initial stock price Option price Option price Option payoff

2 / 4

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Paths in the Binomial Model for a Small Step Size

1 2 3 4 5 8 9 10 11 12 13 14 Time Value

3 / 4

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Paths in the Black–Scholes Model

1 2 3 4 5 9 10 11 12 13 14 Time Value

4 / 4

SLIDE 6