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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 economy is good and the price of SHAK is $60. In the d state, the economy is bad and the price of SHAK is $10. The c.c. risk-free interest rate is zero percent. Assume there is no arbitrage. What is the price of a call option on SHAK with a strike of $40 and a maturity of one year, and what is the price of a put option on SHAK with a strike of $40 and a maturity of one year?
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