Footnote 1 shows that the correct discount rate to use for the real-world expected payoff in the

Question:

Footnote 1 shows that the correct discount rate to use for the real-world expected payoff in the case of the call option considered in Figure 12.1 is \(42.6 \%\). Show that if the option is a put rather than a call the discount rate is \(-52.5 \%\). Explain why the two real-world discount rates are so different.


Figure 12.1

image text in transcribed

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question
Question Posted: