Reconsider the determination of the hedge ratio in the two$-$state model where we showed that one$-$third share of stock would

hedge one option. The possible end$-$of$-$year stock prices, $u{S}_{}=$$$115($up state$)$ and $d{S}_{}=$$$83($down state$).$

Required:

a$.$ What would be the call option hedge ratio for each of the following exercise prices: $$115,$$$110,$$$92,$$$83,$ given the possible

end$-$of$-$year stock prices, $u{S}_{}=$$$115($up state$)$ and $d{S}_{}=$$$83($down state$)?$

b$.$ What do you conclude about the hedge ratio as the option becomes progressively more in the money?

Complete this question by entering your answers in the tabs below.

What would be the call option hedge ratio for each of the following exercise prices: $$115,$$$110,$$$92,$$$83,$ given the possible

end$-$of$-$year stock prices, $u{S}_0=$$$115($up state$)$ and $d{S}_0=$$$83($down state$)?$

Note: Round your answers to $3$ decimal places.