Question
You have a stock trading at $90. You expect the stock to go to either 100 or 80 in one period. The risk-free rate for
You have a stock trading at $90. You expect the stock to go to either 100 or 80 in one period. The risk-free rate for the period is 6%. Could you replicate the payoff of a 90 call option on the stock by combining the stock and the risk-free instrument? Justify your answer.
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International Finance
Authors: Keith Pilbeam
3rd Edition
1403948372, 978-1403948373
