A Binomial Tree Prices an American Option at $3

question 3

Multiple Choice

A binomial tree prices an American option at $3.12 and the corresponding European option at $3.04.The Black-Scholes-Merton 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:

Brain Scans

Imaging techniques, such as MRI or CT scans, used to visualize the structure or function of the brain.

Functional Magnetic Resonance Imaging

A neuroimaging technique that measures brain activity by detecting changes associated with blood flow, used to understand brain function.

Blood Oxygen

The level of oxygen saturation in the blood, an important indicator of respiratory and circulatory system health.

Radio Frequencies

Electromagnetic waves typically ranging from 3 kHz to 300 GHz, used in various technologies including radio, television, and mobile phones.