A call has strike $11 and underlying asset with CRR notation S = 12, u...
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A call has strike $11 and underlying asset with CRR notation S = 12, u = 1.1 and d = 0.9. For a two-step model with R = 1.05 and 1 = 0.75, if a writer is hedging, what should the hedge look like at node (1,0)? O $3.7714 borrowed, and buy 0.4074 fraction of the underlying. O $10.4762 deposited, and short sell one of the underlying. $10.4762 borrowed, and buy one of the underlying. $3.7714 deposited, and short sell 0.4074 fraction of the underlying
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