A binomial tree prices an American option at $3.12 and the corresponding European option at $3.04 . The Black-Scholes-Merton price of the European option is $2.98 . What is the control variate price of the American option?
A. $3.06
B. $3.18
C. $2.90
D. $3.08
A
The control variate price is 3.12+(2.98-3.04) = 3.06 .
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