A stock price is currently $80. Over each of the next two six-month periods, it...
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A stock price is currently $80. Over each of the next two six-month periods, it is expected to go up by 6% or down by 6%. The risk-free interest rate is 5% per year with semi-annual compounding. Discuss how you can hedge risk if you write the above put option with an exercise price of $80 and 1-year maturity.
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