Suppose that a share currently trades at £150 and each month thereafter either increases by 2% or decreases by 1%. Interest is compounded continuously at rate 3% per year. Calculate the no-arbitrage price of one thousand European put options with strike price £135 and expiry date one year from now. Enter your answer correct to the nearest penny, but do not enter the pound sign. Answer:

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Suppose that a share currently trades at £150 and each month thereafter either increases by 2% or decreases by 1%. Interest is
compounded continuously at rate 3% per year. Calculate the no-arbitrage price of one thousand European put options with strike
price £135 and expiry date one year from now. Enter your answer correct to the nearest penny, but do not enter the pound sign.
Answer:
Transcribed Image Text:Suppose that a share currently trades at £150 and each month thereafter either increases by 2% or decreases by 1%. Interest is compounded continuously at rate 3% per year. Calculate the no-arbitrage price of one thousand European put options with strike price £135 and expiry date one year from now. Enter your answer correct to the nearest penny, but do not enter the pound sign. Answer:
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