Description 
Consider an American put option on a nondividend paying stock. The current stock price is $32, the option strike price is $30, the riskless rate is 4.25% (expressed on an actual/365 basis), annualized volatility is 30%, and the option maturity date is 15 December 2003. What is the value of the option assuming a valuation date of 15 February 2003? 




Function Specification 
=oBIN(2, 2, "15/2/03", "15/12/03", 32, 30, 0.3, 0.0425, 0, 200, 0) 





Parameter Name 
Parameter Value 



. 



CallPut 
2 



Exercise Style 
2 



Value Date 
15/2/03 



Maturity Date 
15/12/03 



Spot 
$32 



Exercise 
$30 



Volatility 
0.30 



Risk Free 
0.0425 



Dividend Yield 
0 



Steps 
200 



Output Flag 
0 





Solution 
Given that the underlying stock does not pay a discrete dividend during the life of the option, this option can be valued using a binomial tree model with constant timesteps. If we build a tree with 200 timesteps, the oBIN( ) function returns an option value of: OV = 2.3969 




Greeks 
The following Greeks are computed using the formulas specified in oBIN( ) Model Greeks: 

Delta 
0.3458975 

Gamma 
0.0419041 

Theta 
1.8317323 

Vega 
10.622727 

Rho 
1.508379 
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