FRM: Binomial (one step) for option price

The binomial solves for the price of an option by creating a riskless portfolio. For more financial risk videos, visit our website! http://www.bionicturtle.com

Comments

1. at 5:34
   can anyone please exlain how he got 4.367 and 0.633?
2. Where is the 1 come from?
3. how do you mind U and D?
4. Do you have any video that references to John Hull's textbook? Thanks!
5. The stock price of Bravo Corp. is currently $125. The stock price a year from now will be either $220 or $95 with equal probabilities. The interest rate at which investors invest in riskless assets is 2%. Using the binomial OPM, the value of a put option with an exercise price of $155 and an expiration date 1 year from now should be worth ________ today.
    
   a $29.52
   b $53.50
   c $43.53
   d $12.52
   
   What is the formula please
6. Could you please tell me why payoff is 22(delta)-1 and not 2(delta)-1? The stock price was initially $20 so, he must have spent $20 to purchase this stock. So, if the value goes up to $22, shouldn't the gain be $2 per share or 2(delta) for delta shares?
7. at 4.39 how did u get 0.25?
8. I don't understand why I am getting a different call option price if I use a different approach here. Am I doing something wrong? I computed the probability p by the following formula: 20 = (22/1.12^0.25)p + (18/1.12^0.25)(1-p) --> p = 0.6437. With this p, I calculated the call option price by: 2p / (1.12^0.25) = 1.2514. Why is this value so much higher?
9. i want cookies! =D
10. so confusing.
11. how do you find delta?
12. thanks a lot, much more helpful than my lecturer.
13. Thanks for the video!
14. thanks a lot for his video
15. Money.
16. Fuck this stuff is boring. Why am i studying it?
17. Very nice. Can you please show a two node model with implied volatility as well?
18. thanks a lot for the video!
19. @bionicturtledotcom would you explain it in algebraic form?
20. very well explained