Question: Reconsider the determination of the hedge ratio in the two
Reconsider the determination of the hedge ratio in the two- state model ( in Section 19.3), where we showed that one- half share of stock would hedge one option. What is the hedge ratio at the following exercise prices: 120, 110, 100, 90? What do you conclude about the hedge ratio as the option becomes progressively more in the money?
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