Assume a volatility of 25%. What is going to be the hedging ratio for a replicating portfolio for an option that pays $0

Business, Finance, Economics, Accounting, Operations Management, Computer Science, Electrical Engineering, Mechanical Engineering, Civil Engineering, Chemical Engineering, Algebra, Precalculus, Statistics and Probabilty, Advanced Math, Physics, Chemistry, Biology, Nursing, Psychology, Certifications, Tests, Prep, and more.
Post Reply
answerhappygod
Site Admin
Posts: 899604
Joined: Mon Aug 02, 2021 8:13 am

Assume a volatility of 25%. What is going to be the hedging ratio for a replicating portfolio for an option that pays $0

Post by answerhappygod »

Assume a volatility of 25%. What is going to be the hedging
ratio for a replicating portfolio for an option that pays $0$ in
the case of good state of the world and $2$ in the BAD state of the
world. Assume the option expires in half a year and the current
stock price is 20$ ( Hint: form the replicating portfolio and calc
the alpha for this payoff ) PLEASE ANSWER ASAP WILL GIVE POSITIVE
RATING
p.s. Don't chase bps !!
-0.28
-0.14
-0.89
NONE OF THE ABOVE
Join a community of subject matter experts. Register for FREE to view solutions, replies, and use search function. Request answer by replying!
Top
Post Reply

Return to “Archived Questions & Answers”