PPT Slide

2.15

Option price at G = 50 - 35.36 = 14.64

With no early exercise privilege, option price at A:

(0.5076 ? 5.45 + 0.4924 ? 14.64)e-0.10 ? 0.0833 = 9.90

option price at A = max (9.90, 10.31) = 10.31

4.48

56.12

44.55

6.95

62.99

0.63

3.76

39.69

10.35

70.70

56.12

1.30

44.55

6.37

35.36

14.64

79.35

62.99

2.66

39.69

10.31

31.50

18.50

89.07

70.07

56.12

44.55

5.45

35.36

14.64

28.07

21.93

upper figures are stock prices

lower figures are option prices