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Todays price of Shake Shack (SHAK) is $40. SHAK does not pay dividends. One year from today, there are two possible states. In the u
Todays price of Shake Shack (SHAK) is $40. SHAK does not pay dividends. One year from today, there are two possible states. In the u state, the price of SHAK is $80. In the d state, the price of SHAK is $20. The c.c. risk-free interest rate is two percent. Assume there is no arbitrage. A root derivative has payoffs Xu =Su and Xd =Sd. What is the price of the root derivative? Round your answer to three decimal places.
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