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The current price of a non-dividend-paying stock is $248.72 and you expect the stock price to be either $273.59 or $226.11 after 0.5 years. A
The current price of a non-dividend-paying stock is $248.72 and you expect the stock price to be either $273.59 or $226.11 after 0.5 years. A European call option on the stock has a strike price of $250 and expires in 0.5 years. The risk-free rate is 3% (EAR).
What is the hedge ratio (delta)?
How much money do you need to invest in riskless bonds to create a portfolio that replicates the payoff from one call option? Enter any amount borrowed as a negative number.
What should be the price (premium) of the call option?
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