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The following information summarizes stock price behavior that is consistent with the Black-Scholes model: S0=120, rf=3%, =0. a) Whats the price of an at-the-money European
The following information summarizes stock price behavior that is consistent with the Black-Scholes model: S0=120, rf=3%, =0.
a) Whats the price of an at-the-money European call with maturity time T=1?
b) Although =0, the call price isnt 0. How do you explain it?
c) How to hedge the risk of the call option? Give numbers.
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