Question
A stock price is currently 100. There are two states of nature in two month. The stock price realization in two months in the up
A stock price is currently 100. There are two states of nature in two month. The stock price realization in two months in the up state is 114, while in the down state it is not known. The simple risk-free interest rate is 7% per annum.
What is theprice of a derivative that pays -37 in both states of nature?
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Answer To calculate the price of the derivative we can use the concept of present value First we nee...
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Fundamentals of Futures and Options Markets
Authors: John C. Hull
8th edition
978-1292155036, 1292155035, 132993341, 978-0132993340
