Question
A stock price is currently P50.It is known that at the end of 6months it will be either P60 or P42. The risk-free rate of
A stock price is currently P50.It is known that at the end of 6months it will be either P60 or P42. The risk-free rate of interest with continuous compounding is 12% per annum. Calculate the value of a 6-month European call option on the stock with an exercise price of P48. Verify that noarbitrage(hedging) arguments and risk-neutral valuation arguments give the same answers.
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The Municipal Budget Crunch A Handbook For Professionals
Authors: Roger L. Kemp
1st Edition
0786463740, 978-0786463749
