Binomial option pricing model consider a binomial world in, Ask an Expert

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(Binomial Option Pricing Model) Consider a binomial world in which the current stock price of 80 can either go up by 10 percent or down by 8 percent. The risk-free rate is 4 percent. Assume a one-period world. Answer questions below about a call with an exercise price of 80.

a. What would be the call's price if the stock goes up?

b. What would be the call's price if the stock goes down?

c. What is the hedge ratio?

d. What is the theoretical value of the call?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91776089

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