Question
Data: S 0 = 120; X = 126; 1 + r = 1.05. The two possibilities for S T are 150 and 102. 1 .
| Data: S0 = 120; X = 126; 1 + r = 1.05. The two possibilities for ST are 150 and 102. |
| 1. | The range of S is 48, while that of C is 24 across the two states. What is the hedge ratio of the call? (Round your answer to 2 decimal places.) |
| Hedge ratio |
| 2. | Calculate the value of a call option on the stock with an exercise price of $126. (Do not use continuous compounding to calculate the present value of X in this example because we are using a two-state model here, not a continuous-time Black-Scholes model.) (Round your answer to 2 decimal places. Omit the "$" sign in your response.) |
| Call value | $ |
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The FinTech Book The Financial Technology Handbook For Investors Entrepreneurs And Visionaries
Authors: Susanne Chishti, Janos Barberis
1st Edition
111921887X, 9781119218876
