Skip to Main Content
Derivatives and Risk Management, 1st Edition
book

Derivatives and Risk Management, 1st Edition

by Sundaram Janakiramanan
May 2024
Intermediate to advanced content levelIntermediate to advanced
542 pages
27h 26m
English
Pearson India
Content preview from Derivatives and Risk Management, 1st Edition
374 Derivatives and Risk Management
15.6 The Single-period Binomial Options Pricing Model
A single-period binomial options pricing model is useful in valuing non-dividend-paying European op-
tions, as this option can be exercised only on the exercise date and we are only interested in the possible
stock prices on the exercise date.
At time T – 1, the stock price is S
T–1
. At time T, the stock price could be either u S
T–1
or d S
T–1
, where
u > 1 and d < 1. is means that the price at T will either increase to u S
T–1
or decrease to d S
T–1
. is is
shown in Figure 15.1.
If there is a call option with an exercise price of S
X
and an expiry date of T
Become an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month,
and much more.
Start your free trial

You might also like

Derivatives and Risk Management

Derivatives and Risk Management

Madhumathi Madhumathi, Ranganatham Ranganatham
Derivatives and Risk Management

Derivatives and Risk Management

Sundaram Janakiramanan

Publisher Resources

ISBN: 9781299447547Publisher Website