You have a stock with a current price of $25.00. You are going to value a call option with an exercise price of $26.00. The up and down factors are 1.10 and 0.90 respectively. The stock will go through two time periods before it expires. The risk free rate per time period is 2%. Value this option the following 2 ways:

A) By calculating the necessary hedge ratio(s)

B) By calculating the risk neutral probability defined

Question 1 You have a stock with a current price of $25.00. You are going to value a call option with an exercise price of $26.00. The up and down factors are 1.10 and 0.90 respectively. The stock will go through two time periods before it expires. The risk free rate per time period is 2%. Value this option the following 2 ways: A By calculating the necessary hedge ratio(s) h = Cy-Ca Su-sa B) By calculating the risk neutral probability defined as P = 1+r-d u-d