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:

Activist

An individual who takes deliberate action to bring about social, political, economic, or environmental change.

Tokenism

The practice of making only a perfunctory or symbolic effort to do a particular thing, especially by recruiting a small number of people from underrepresented groups in order to give the appearance of equality within a workforce.

All-male Group

A group or assembly consisting exclusively of male members, without participation from women or non-binary individuals.

All-White Group

A collective or assembly consisting exclusively of white individuals, which may be highlighted in discussions of diversity and inclusivity.