Download This PaperDiscrete Option Pricing: A Simplified Exposition (Part Ii)
Fulbright Economics Teaching Program, Teaching Note
57 Pages Posted: 24 Oct 2000
Date Written: September 2000
Abstract
This is a continuation of the simplified exposition of Discrete Option Pricing. In this teaching note, I discuss some of the determinants of the values for the call and put options. Second, I derive the put-call parity relationship. Third, as a practical application, the ideas of put and call options are used to value the position of the equity holder in a levered firm.
Finally, I extend the discrete option pricing model to two and three periods.
Keywords: Discrete Option Pricing, Risk Neutral Valuation
JEL Classification: G12, G13
Suggested Citation: Suggested Citation
Tham, Joseph, Discrete Option Pricing: A Simplified Exposition (Part Ii) (September 2000). Fulbright Economics Teaching Program, Teaching Note, Available at SSRN: https://ssrn.com/abstract=244010 or http://dx.doi.org/10.2139/ssrn.244010
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