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TSLA stock is trading at St = 50, and so is the stock of GOOG - SG = 50. After 1 period, TSLA stock can
TSLA stock is trading at St = 50, and so is the stock of GOOG - SG = 50. After 1 period, TSLA stock can go to Ut St or dt St, where ut = 1.6 and dt = 0.8. Similarly for GOOG stock, where ug = 1.64 and do = 0.96. A risk-free investment of 1 returns 1.05 after 1 period. 1. Using replication, price a one-period call option struck at 50 on TSLA, CT(50). What is the delta of the call on TSLA, A(G(50))? 2. Using replication, price a one-period put option struck at 50 on TSLA, P+(50). What is the delta of the put on TSLA, A(P+(50))? What is the difference between A(G(50)) and A(P+(50))? 3. Let the spot price of TSLA be 55. What are the new deltas - A'(G(50)) and A'(P+(50))? In which direction did each one move, and why? What is the difference between the two? 4. A(CT(K))=0.5. What is K? 5. Using replication, price a one-period call option struck at 50 on GOOG, CG(50). What is the delta of the call on GOOG, A(CG(50))? TSLA stock is trading at St = 50, and so is the stock of GOOG - SG = 50. After 1 period, TSLA stock can go to Ut St or dt St, where ut = 1.6 and dt = 0.8. Similarly for GOOG stock, where ug = 1.64 and do = 0.96. A risk-free investment of 1 returns 1.05 after 1 period. 1. Using replication, price a one-period call option struck at 50 on TSLA, CT(50). What is the delta of the call on TSLA, A(G(50))? 2. Using replication, price a one-period put option struck at 50 on TSLA, P+(50). What is the delta of the put on TSLA, A(P+(50))? What is the difference between A(G(50)) and A(P+(50))? 3. Let the spot price of TSLA be 55. What are the new deltas - A'(G(50)) and A'(P+(50))? In which direction did each one move, and why? What is the difference between the two? 4. A(CT(K))=0.5. What is K? 5. Using replication, price a one-period call option struck at 50 on GOOG, CG(50). What is the delta of the call on GOOG, A(CG(50))
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