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6.) Reconsider the determination of the hedge ratio in the two-state model (Section 16.2), where we showed that one-third share of stock would hedge one
6.) Reconsider the determination of the hedge ratio in the two-state model (Section 16.2), where we showed that one-third share of stock would hedge one option. What would be the hedge ratio for each of the following exercise prices: (a) $120; (b) $110; (c) $100; (d) $90? What do you conclude about the hedge ratio as the option becomes progressively more in the money?
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