Question
A stock is trading at $50. It is known that at the end of 3 months it will be either $60 or $42. The continuously
A stock is trading at $50. It is known that at the end of 3 months it will be either $60 or $42. The continuously compounded interest rate is 4%. A 3-month European put option has a strike price of $50. How do you use stock and bond to replicate the option's payoff? What should be its price?
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Investment Analysis And Portfolio Management
Authors: Frank K. Reilly, Peggy L. Hedges, Philip Chang, Keith C. Brown, Hedges Reilly Brown
1st Canadian Edition
0176500693, 978-0176500696
