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Suppose the price of a stock S today is 100. The strike prices of call...

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Finance

Suppose the price of a stock S today is 100. The strike prices of call and put options trading on this stock are 110. These financial options mature in 24 months. Both European and American options are traded. CAPM Beta for stock S is 0.6. The monthly volatility of the market index returns is 14.4%. The annual correlation between stock S and the market index is 0.7. The discount risk-free rate is 4% per half annum. The market risk premium is 4% per annum. Use the binomial option pricing approach with a time step of 8 months to value European and American call and put options on the stock.

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