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The current price of a non-dividend-paying stock is $30. Over the next six months it is expected to rise to $36 or fall to $26.
The current price of a non-dividend-paying stock is $30. Over the next six months it is expected to rise to $36 or fall to $26. Assume the risk-free rate is zero. An investor sells six-month call options with a strike price of $32. a) Describe a portfolio which could be used to hedge the position. b) What is the risk-neutral probability of that the stock price will be $36? c) What is the value of each call option
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