Black-Scholes and Binomial Option Pricing

QUESTION

 Using Excel:Part3: Black-Scholes and Binomial Option PricingLet us compute an option price using Black-Scholes Model and Binomial Tree model.1. Download daily BAC stock price from either Yahoo Finance or Bloomberg. The data periodis from December 31, 2014 and October 30, 2015. Compute log returns for each stock byusing the below equation.RT = ln(PTPT −1), t = T, T − 1, . . . , 1where RT is a stock return for BAC at time T (day) and PT is an adjusted close price at timeT.2. Calculate both average and standard deviation of daily stock returns.R¯ =XT1RiTσ =vuutX101Ri − R¯T − 13. Calculate an annualized return and standard deviation, which are given byR¯annualized = R¯daily ×√256σannualized = σdaily ×√256

ANSWER

CLICK HERE TO GET AN EXPERT SOLUTION TO THE QUESTION