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Consider four-month European options on a non-dividend paying stock whose price is currently 10% above the strike price. Assume a 12% risk-free rate and stock
Consider four-month European options on a non-dividend paying stock whose price is currently 10% above the strike price. Assume a 12% risk-free rate and stock price volatility of 30% per annum.
A. Calculate the deltas for the call and the put.
Delta for call:
Delta for put:
B. If the stock price falls 20% from its current level, how do these answers change?
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