If HP share price today is $30 and in one month it can either become 31.5 or
Fantastic news! We've Found the answer you've been seeking!
Question:
If HP share price today is $30 and in one month it can either become 31.5 or 28.5, then how can you be able to create a riskless portfolio using a European put option written on this HP share with a strike price of $30 and expiring in one month? Show that the portfolio you created has become riskless.
If the risk-free rate is 12 percent per annum continuously compounded, what would be the price of that European put option based on one-step binomial tree method of option valuation?
Related Book For
Principles of Accounting
ISBN: 9780077300456
1st edition
Authors: Robert Libby, Patricia Libby, Fred Phillips, Stacey Whitecotton
Posted Date: