3.7 Exercises

3.01 Price estimate for a European call.

3.02 Convergence study using trees.

3.03 American put calculated with a tree.

3.04 Stock option with a dividend yield.

3.05 Stock option with transaction costs.

3.06 Bond option with forward contracts.

3.07 Convertible bond option.

3.08 Forecast mean and bounds for a share price.

3.09 Binomial tree for bonds.

All these problems can be edited and submitted for correction by selecting WORK:assignments on the course main page. They generally open with a template that provides useful advice and guidance to derive the solution. The color coding corresponds to the expected level of difficulty:

Easy.

The problem is a direct application of the theory in a situation of practical interest: solutions typically combine text without formulas, ASCII plots and parameters of the VMARKET applet without any programming.

Moderate.

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