Stock A is trading for $150. Consider an option that allows you to buy the stock for $150. What type of option is it, an
Posted: Sat Nov 27, 2021 5:20 pm
Stock A is trading for $150. Consider an option that allows you
to buy the stock for $150. What type of option is it, and in which
state is it at? a) If the stock can only go either up to $190 or
down to $130 in the six months before expiry, what is the payoff of
the option? b) At a 4% semi-annual interest rate, calculate the
delta of the option . c) How much do you have to borrow / lend to
replicate the payoff of the option? d) What is the value of the
option using replication? e) What is the value of the option using
risk neutral probabilities?
to buy the stock for $150. What type of option is it, and in which
state is it at? a) If the stock can only go either up to $190 or
down to $130 in the six months before expiry, what is the payoff of
the option? b) At a 4% semi-annual interest rate, calculate the
delta of the option . c) How much do you have to borrow / lend to
replicate the payoff of the option? d) What is the value of the
option using replication? e) What is the value of the option using
risk neutral probabilities?