1.Price a one year American call option with strike price $22, written on a $20 stock. Volatility is 15%. The stock will pay a dividend of $2 in 1 month’s time, and another of $3 in 7 months’ time. Interest rates are 2% (with continuous compounding).. Use Black’s approximation to price the option. 2Price a 6 month American call option with strike price 1100, written on a 2 year futures contract on oil. Volatility is 18%. Interest rates are 5% (with continuous compounding). The current futures price is 1050. Use a two step tree, with 3 month time steps.
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