Question
Consider a stock which follows the binomial model with upward rate 1.2 and downward rate 0.7. Consider an European call option with strike price 100
Consider a stock which follows the binomial model with upward rate 1.2 and downward rate 0.7. Consider an European call option with strike price 100 yen and maturity 1 year. Assume that the interest rate is 5% and the stock price at time 0 is 100 yen.
(i) Calculate the option price and its hedging strategy.
(ii) Calculate the risk neutral probability.
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Financial Statement Analysis
Authors: Andrew P.C.
1st Edition
1520985002, 978-1520985008
