Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. you are trying to price a put option using the bin

You are trying to price a put option using the binomial model. The current stock...

70.2K

Verified Solution

Question

Finance

You are trying to price a put option using the binomial model. The current stock price is $100, the exercise price is $110, and the risk-free rate is 10%. The two possibilities for ST are 130 and 80. a. What is the hedge ratio of the put? (Round your answer to 1 decimal place. Negative value should be indicated by a minus sign.) b. Form a portfolio of three shares of stock and five puts. What is the (nonrandom) payoff to this portfolio?

c. What is the present value of the portfolio? (Round your answer to 2 decimal places.)

d. Calculate the put value. (Round your answer to 2 decimal places.)

Answer & Explanation Solved by verified expert
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!
Become a Member

Other questions asked by students

Q

According to the Mayo Clinic, bipolar disorder \"causes mood swings that range from the lows of...

Biology
Q

The following system is a small power generating plant which contains a boiler, a superheater, a...

Mechanical Engineering
Q

The ratio of magnetic field at the centre of the uniform coil of single turn...

Physics
Q

The plates of parallel plate capacitor are charged upto 100 V A 2 mm thick...

Physics
Q

Find the value of the expression See Examples 3 5 Objective 2 G 7 3

Basic Math
Q

4 Using the formula I PRT to find simple interest on an account find the...

Algebra
Q

Inspection costs at one of Ratulowski Corporation's factories are listed below: Units Inspection Produced...

Accounting
Q

LOGIC COMPANY Comparative Income...

Accounting
Q

The following information is available for the preparation of the government-wide financial statements for the...

Accounting
Q

ACCT3055.COST ACCOUNTING I Mdulo 2- Examen Parcial 2 37 DE 38...

Accounting
Q

what steps are taken to complete the cycle of the accounts payable I need a...

Accounting
Q

A trader sells 2 options simultaneously Type Exercise Premium Price $/ Call 1.5880 10.12 Put...

Finance