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A claim has time two values of 10, 2 and 7. The time one up and downstate stock prices are 104 and 92 on a
A claim has time two values of 10, 2 and 7. The time one up and downstate stock prices are 104 and 92 on a one year two period tree with an interest rate of 6.45% continuously compounded. Show that the hedge ratio, delta or hedge position in the stock at the root of the tree is 0.1210
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