The price of a stock today is 100 s0 100 next period t it, Ask an Expert

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The price of a stock today is $100: S0 = $100. Next period, T, it can go up by 20% (ST = $120) or decrease by 20% (ST = $80). Consider now an at-the-money call option on the stock. Hedge Ratio, H = 1/2.

Draw a graph of the payoff from a portfolio consisting of buying H shares of the stock and writing one call option. Have the price of the stock on the x-axis and the payoffs of the portfolio on the y-axis.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92873385

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