7. Reconsider the determination of the hedge ratio in the two-state model (see page 724), where we...
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7. Reconsider the determination of the hedge ratio in the two-state model (see page 724), where we showed that one-third share of stock would hedge one option. What would be the hedge ratio for the following exercise prices: 120, 110, 100, 90? What do you conclude about the hedge ratio as the option becomes progressively more in the money?
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