Financial Derivatives (FIN429) Tuesday 07-May-2019 Section II QUESTION # 8 Suppose that today's price of ABC stock is $70and it is known that price moves up or down by a single multiple of u' and 'd' respectively in 9-months. Suppose that you buy some (say Delta) stocks today and enter into a strike price $73. Finally, annual risk-free rate is 80 and variance of stock prices is 25% per annum Max. Marks-10-6+3+1] 299 uropean call option to sell one stock in one-and-half years at a S ailingh a. Compute the prices of the call options at Nodes"A" and b. Compute value of Delta at Node B and interpret it. c. What is the difference between 'Delta' and 'Delta Hedging"? ANSWER YT u-d Financial Derivatives (FIN429) Tuesday 07-May-2019 Section II QUESTION # 8 Suppose that today's price of ABC stock is $70and it is known that price moves up or down by a single multiple of u' and 'd' respectively in 9-months. Suppose that you buy some (say Delta) stocks today and enter into a strike price $73. Finally, annual risk-free rate is 80 and variance of stock prices is 25% per annum Max. Marks-10-6+3+1] 299 uropean call option to sell one stock in one-and-half years at a S ailingh a. Compute the prices of the call options at Nodes"A" and b. Compute value of Delta at Node B and interpret it. c. What is the difference between 'Delta' and 'Delta Hedging"? ANSWER YT u-d