a) b) 308 Suppose SSH Inc. is currently $12 per share and will go either up...

 

Transcribed Image Text:

a) b) 308 Suppose SSH Inc. is currently $12 per share and will go either up to $16 or down to $10. Suppose the risk-free interest rate is 3%. We are interested in finding the price of a put option. What is the hedge ratio using the binomial model? What is the price of a put option using the binomial model? Using put-call parity what is the price of a call option? Re-do parts a) and b) except for call options instead of put options. Does your answer match what you I found in part c)? If interest rates were to increase, all else the same how would that affect the price of the put options? All else the same, how would an increase in the interest rates affect the price of call options? 6 a) b) 308 Suppose SSH Inc. is currently $12 per share and will go either up to $16 or down to $10. Suppose the risk-free interest rate is 3%. We are interested in finding the price of a put option. What is the hedge ratio using the binomial model? What is the price of a put option using the binomial model? Using put-call parity what is the price of a call option? Re-do parts a) and b) except for call options instead of put options. Does your answer match what you I found in part c)? If interest rates were to increase, all else the same how would that affect the price of the put options? All else the same, how would an increase in the interest rates affect the price of call options? 6

Answer rating: 100% (QA)

a To find the hedge ratio using the binomial model we need to calculate the slope of the line connec... View the full answer