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You are given the following information. S=50, X=50, simple annual risk-free interest rate is 5%, standard deviation of monthly stock returns is 10%. Explain what
You are given the following information. S=50, X=50, simple annual risk-free interest rate is 5%, standard deviation of monthly stock returns is 10%. Explain what you would do at each node (how many shares purchased and how much borrowed and owed) to synthetically construct and value one year European call option using a three-period Binomial model?
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