See the following binomial tree. Yellow (top) for stock price, green (middle) for European put option premium, and blue for American put option premium (bottom). 0.78 0.04365 0.04507 0.87547 0.0134 0.0134 0.69494 0.07508 0.07795 0.98263 10 0.78 0.02716 0.02716 0.61915 0.12503 0.13085 1.10291 0 0 0.87547 0 0 0.69494 0.05506 0.05506 0.55163 0.19837 0.19837 At what time, American put should be exercised? OA. When stock price is 0.78, as it is the first time that American value is greater than European value. OB. Anytime that American value is greater than European value. OC. When stock price is 0.61915, as it is the latest time American value is greater than European value. D. When exercising instant payoff St-K is greater than the present value of American future payoff if keeping it alive.
See the following binomial tree. Yellow (top) for stock price, green (middle) for European put option premium, and blue for American put option premium (bottom). 0.78 0.04365 0.04507 0.87547 0.0134 0.0134 0.69494 0.07508 0.07795 0.98263 10 0.78 0.02716 0.02716 0.61915 0.12503 0.13085 1.10291 0 0 0.87547 0 0 0.69494 0.05506 0.05506 0.55163 0.19837 0.19837 At what time, American put should be exercised? OA. When stock price is 0.78, as it is the first time that American value is greater than European value. OB. Anytime that American value is greater than European value. OC. When stock price is 0.61915, as it is the latest time American value is greater than European value. D. When exercising instant payoff St-K is greater than the present value of American future payoff if keeping it alive.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:See the following binomial tree. Yellow (top) for stock price, green (middle) for European put option premium, and blue for American put option premium (bottom).
0.78
0.04365
0.04507
0.87547
0.0134
0.0134
0.69494
0.07508
0.07795
0.98263
0
0.78
0.02716
0.02716
0.61915
0.12503
0.13085
1.10291
0
0
0.87547
0
0
0.69494
0.05506
0.05506
0.55163
0.19837
0.19837
At what time, American put should be exercised?
O A. When stock price is 0.78, as it is the first time that American value is greater than European value.
OB. Anytime that American value is greater than European value.
O C. When stock price is 0.61915, as it is the latest time American value is greater than European value.
OD. When exercising instant payoff St-K is greater than the present value of American future payoff if keeping it alive.
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