Question
A stock price is currently $10. It is known that at the end of three months it will be either $11 or $8.5. The riskfree
A stock price is currently $10. It is known that at the end of three months it will be either $11 or $8.5. The riskfree interest rate is 5% per annum with continuous compounding. SupposeSTis the stock
price at the end of three months.
(a)What is the value of a derivative that pays offln(ST)at this time? Useboththe no arbitrage
and risk neutral valuation approach.
(b)What is the delta of the derivative in part (a)? How do you interpret that number?
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Technical Analysis The Complete Resource for Financial Market Technicians
Authors: Charles D. Kirkpatrick, Julie R. Dahlquist
1st edition
134137043, 134137049, 978-0131531130
