You are attempting to value a call option with an exercise price
of $108 and one...
50.1K
Verified Solution
Link Copied!
Question
Finance
You are attempting to value a call option with an exercise priceof $108 and one year to expiration. The underlying stock pays nodividends, its current price is $108, and you believe it has a 50%chance of increasing to $133 and a 50% chance of decreasing to $83.The risk-free rate of interest is 9%. Calculate the call option’svalue using the two-state stock price model.
Answer & Explanation
Solved by verified expert
3.9 Ratings (408 Votes)
Calculate the calloption valueGiven dataExercise price X 108Time to expiration T 1 yearCurrent price of stock 108Value of stock when price goes up 133Value of stock when price goes down 83Riskfree interest rate 9 009Calculate the hedge ratioHedge ratio is the
See Answer
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Zin AI - Your personal assistant for all your inquiries!
