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\title{Derivatives Lab}
\author{Sessions 8--9}
\date{October 8--9, 2012}
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\begin{enumerate}

\item Implement the binomial tree model via backward induction. 

Test your code by pricing a European call option with strike price
$K=0.9$, risk-free interest rate $r=0.05$, and maturity time $T=1$ on
a stock with initial stock price $S_0=1$ and annualized volatility
$\sigma=0.3$.

\item Visualize your simulation using \texttt{imshow}.  Think about an
appropriate color map, how to mask the missing values (Hint: use
Numpy's masked arrays), and how to best map the computed values into
pixel coordinates.

\item Show that an American call option should be exercised at
expiration for maximal profit.

\end{enumerate}

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