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Question: The current price of a non-dividend paying stock is 50. in 6 months, it will be either 60 or 42. The risk-free interest rate is 12% per year with continuous compounding. Consider a 6-month European call on the stock with strike 48. Construct a replicating portfolio for the call and compute the price of the call. If you sell 300 of such calls, how would your delta hedge?

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Category:- Basic Finance
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