12.19. The current price of a non-dividend-paying biotech stock is $140 with a volatility of 25%. The

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12.19. The current price of a non-dividend-paying biotech stock is $140 with a volatility of 25%.

The risk-free rate is 4%. For a three-month time step:

(a) What is the percentage up movement?

(b) What is the percentage down movement?

(c) What is the probability of an up movement in a risk-neutral world?

(d) What is the probability of a down movement in a risk-neutral world?

Use a two-step tree to value a six-month European call option and a six-month European put option. In both cases the strike price is $150.

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Fundamentals Of Futures And Options Markets

ISBN: 9780134083247

9th Edition

Authors: John Hull

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Question Posted: Jul 26, 2024 08:00 AM

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12.19. The current price of a non-dividend-paying biotech stock is $140 with a volatility of 25%. The

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Fundamentals Of Futures And Options Markets

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