Question
A stock price is currently $50. It is known that at the end of two months it will be either $53 or $48. The risk-free
A stock price is currently $50. It is known that at the end of two months it will be either $53 or $48. The risk-free interest rate is 10% per annum with continuous compounding. Use no arbitrage arguments. a) Whatisthevalueofatwo-monthEuropeanputoptionwithastrikepriceof$50? b) How would you hedge a short position in the option?
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Fundamentals of Financial Management
Authors: Eugene F. Brigham, Joel F. Houston
Concise 6th Edition
324664559, 978-0324664553
