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b . Find the hedge ratio, construct a hedged portfolio using stocks and call and prove that this is a hedged portfolio. ( 1 0
b Find the hedge ratio, construct a hedged portfolio using stocks and call and prove that this is a hedged portfolio. points
h hedge ratio CuCdSuSd
SC
Buy share sell calls
SC
V
If stock goes up to : Vu
If stock goes down to Vd
return
risk free rate
is this a hedged portfolio
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