0
$\begingroup$

In a 1-period binomial model, with initial stock price 100, if the stock price is either 50,100, or 150 after 1 period then how can I show there is no longer a unique no-arbitrage price for a European call option with strike price K=150. What would the range of values for this price be that ensure there is no arbitrage?

$\endgroup$
  • $\begingroup$ How do you have 3 prices in a 1 step binomial model? $\endgroup$ – Bob Jansen May 12 at 18:39
  • $\begingroup$ Also, your Call would have payoff of zero in an state, no? $\endgroup$ – Kermittfrog May 12 at 19:01

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Browse other questions tagged or ask your own question.