Consider the call option above. After each period, there is a 40% chance for the stock price to go up, 25% chance to stay the same, and 35% chance to go down. Assume μ is the same as the risk-free rate. Stock price is $62. Call option price is 5.83 (calculated from previous problem) (a) Find the up-factor u and down-factor d = 1/u.
This is the second part of the problem. First problem asked to find option price which i did and it came out to $5.83 using excel. every problem we were given we were always given u and d. this one gives percentages and asking to find u and d. i don't even know where to start to find u.