Multiple Choice
A stock has a current price of $100. Assume a CRR-style jump-to-default model in which the volatility is 30%. Let the risk-neutral probability of default in three months be 10%. The 3-month risk-free rate is 2% in continuously-componded and annualized terms. What is the price of a three-month at-the-money put option on this stock in a one-period jump-to-default tree model?
A) $7.22
B) 7.72
C) $11.82
D) $13.42
Correct Answer:
Verified
Correct Answer:
Verified
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