A Binomial Tree Prices an American Option at $3

question 2

Multiple Choice

A binomial tree prices an American option at $3.12 and the corresponding European option at $3.04.The Black-Scholes price of the European option is $2.98.What is the control variate price of the American option?

• A)$3.06
• B)$3.18
• C)$2.90
• D)$3.08

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Definitions:

Linguistic Intelligence

The ability to understand, learn, and apply language effectively.

Crystallized Intelligence

The ability to use learned knowledge and experience, which typically increases or remains stable with age.

Fluid Intelligence

The ability to solve new problems, use logic in new situations, and identify patterns.

Creative Intelligence

The ability to produce new ideas, solutions, or approaches, which is a key component of problem-solving and innovation.