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A stock price is currently $50. Over each of the next two three-month periods it is expected

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A stock price is currently $50. Over each of the next two three-month periods it is expected to go up by 6% or down by 5%. The risk-free interest rate is 5% per annum with continuous compounding. What is the value of a six-month European call option with a strike price of $51?
Strike Price
In finance, the strike price of an option is the fixed price at which the owner of the option can buy, or sell, the underlying security or commodity.
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Balamurugan Kalaiarasu
I have taught Python and Excel VBA to my fellow colleagues as part of knowledge sharing session in my previous company. I have been as Python Developer for the past 5 years. Currently I'm moved to Canada for higher studies in Big Data Solution Architecture. I'd like to share my knowledge to whoever is interested in.
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Fundamentals of Futures and Options Markets

Fundamentals of Futures and Options Markets

ISBN: 978-0132993340

8th edition

Authors: John C. Hull

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A call option is a type of financial contract that gives the holder the right, but not the obligation, to buy an underlying asset (such as a stock, commodity, or currency) at a specified price (called the strike price) within a specified period of time. When an investor purchases a call option, they are essentially betting that the price of the underlying asset will rise above the strike price before the option\'s expiration date. If the price of the asset does rise above the strike price, the investor can exercise the option by buying the asset at the strike price and then selling it at the higher market price, thereby earning a profit. Call options are often used as a speculative investment strategy, as they allow investors to potentially profit from the upward movement of an asset without having to actually own the asset itself. They are also commonly used as a hedging tool to protect against potential losses in a portfolio.

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