Data: So = 108; X=120; 1+r=1.1. The two possibilities for ST are 130 and 90. Required:...
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Data: So = 108; X=120; 1+r=1.1. The two possibilities for ST are 130 and 90. Required: a. The range of S is 40 while that of P is 30 across the two states. What is the hedge ratio of the put? b. Form a portfolio of three shares of stock and four puts. What is the (nonrandom) payoff to this portfolio? c. What is the present value of the portfolio? d. Given that the stock currently is selling at 108, calculate the put value. Data: So = 108; X=120; 1+r=1.1. The two possibilities for ST are 130 and 90. Required: a. The range of S is 40 while that of P is 30 across the two states. What is the hedge ratio of the put? b. Form a portfolio of three shares of stock and four puts. What is the (nonrandom) payoff to this portfolio? c. What is the present value of the portfolio? d. Given that the stock currently is selling at 108, calculate the put value.
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