11 Suppose the stock price is $50, but that we plan to buy 100 shares if and when the stock reaches $45 Suppose further that 0 3, r 0 08, T t 1, and 0 This is a noncancellable limit order a What transaction could you undertake to offset the risk of this obligation b You can view this limit order as...

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11. Suppose the stock price is $50, but that we plan to buy 100 shares if and...

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11. Suppose the stock price is $50, but that we plan to buy 100 shares if and when the stock reaches $45. Suppose further that σ = 0.3, r = 0.08, T − t = 1, and δ = 0.

This is a noncancellable limit order.

a. What transaction could you undertake to offset the risk of this obligation?

b. You can view this limit order as a liability. What is its value?

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Derivatives Markets Pearson New International Edition

ISBN: 978-1292021256

3rd Edition

Authors: Robert L. Mcdonald

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Question Posted: Jul 22, 2024 09:00 AM

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11. Suppose the stock price is $50, but that we plan to buy 100 shares if and...

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Derivatives Markets Pearson New International Edition

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