Lt s0 100 k 105 r 8 t 05 and delta 0 suppose that u , Ask an Expert

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Let S(0) = $100, K = $105, r = 8%, T = 0.5 and δ = 0. Suppose that u = 1.3 and d = 0.8. Using the one-period binomial model, calculate the following:

a. The fair premium for a European put with the above characteristics.

b. The ? in the corresponding replicating portfolio.

c. The amount B invested in the riskless asset in the replicating portoflio.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92745121

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