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Suppose the stock price is 50, the risk-free rate is 2% continuously compounded. What is the price of a 1 year call struck at 50
Suppose the stock price is 50, the risk-free rate is 2% continuously compounded. What is the price of a 1 year call struck at 50 if the volatility is 0. How would you hedge the call. Check your answer with the option calculator making volatility smaller and smaller.
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