Show that Black-Scholes call option hedge ratios also increase as the stock price increases. Consider a 1-year
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Show that Black-Scholes call option hedge ratios also increase as the stock price increases.
Consider a 1-year option with exercise price $50, on a stock with annual standard deviation 20%.
The T-bill rate is 3% per year. Find N(d1) for stock prices
(a) $45,
(b) $50, and
(c) $55.
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