Consider a put option on a non-dividend-paying stock when the stock price is $$\$ 40$$, the strike price is $$\$ 42$$, the risk-free interest rate is $2 \%$, the volatility is $25 \%$ per annum, and the time to maturity is three months. Use DerivaGem to determine the following:
(a) The price of the option if it is European (use Black-Scholes: European)
(b) The price of the option if it is American (use Binomial: American with 100 tree steps) (c) Point B in Figure 11.7.
11.31. Section 11.1 gives an example of a situation where the value of a European call option decreases as the time to maturity is increased. Give an example of a situation where the same thing happens for a European put option.