Question

Use a three-time-step binomial tree to value a 9-month American call option on wheat futures. The current futures price is 400 cents, the strike price is 420 cents, the risk-free rate is $6 \%$, and the volatility is $35 \%$ per annum. Estimate the delta of the option from your tree.

   Use a three-time-step binomial tree to value a 9-month American call option on wheat futures. The current futures price is 400 cents, the strike price is 420 cents, the risk-free rate is $6 \%$, and the volatility is $35 \%$ per annum. Estimate the delta of the option from your tree.
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Options, Futures, and Other Derivatives
Options, Futures, and Other Derivatives
John C. Hull 10th Edition
Chapter 21, Problem 11 ↓

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The up factor is calculated as: $$u = e^{(r + \sigma^2/2) \cdot \sqrt{\Delta t}}$$ where $r$ is the risk-free rate and $\sigma$ is the volatility. The down factor is calculated as: $$d = e^{(r - \sigma^2/2) \cdot \sqrt{\Delta t}}$$ where $\Delta t$ is the time  Show more…

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Use a three-time-step binomial tree to value a 9-month American call option on wheat futures. The current futures price is 400 cents, the strike price is 420 cents, the risk-free rate is $6 \%$, and the volatility is $35 \%$ per annum. Estimate the delta of the option from your tree.
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