Question: Data: S0 = 102; X = 115; 1 + r = 1.1. The two possibilities for ST are 146 and 84. a. The range of

Data: S0 = 102; X = 115; 1 + r = 1.1. The two possibilities for ST are 146 and 84.

a. The range of S is 62 while that of P is 31 across the two states. What is the hedge ratio of the put?

b. Form a portfolio of one share of stock and two 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 102, calculate the put value

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Q:

Problem 21-9 Data: S 0 = 102; X = 115; 1 + r = 1.1. The two possibilities for S T are 146 and 84. a. The range of S is 62 while that of P is 31 across the two states. What is...

Q:

Data: S 0 = 102; X = 116; 1 + r = 1.08. The two possibilities for S T are 150 and 82. a. The range of S is 68 while that of P is 34 across the two states. What is the hedge ratio of the put? (Round...

Q:

Data: S 0 = 108; X = 115; 1 + r = 1.12. The two possibilities for S T are 136 and 80. a. The range of S is 56 while that of P is 35 across the two states. What is the hedge ratio of the put? (Round...

Q:

Data: S 0 = 109; X = 116; 1 + r = 1.1. The two possibilities for S T are 157 and 75. a. The range of Sis 82 while that of Pis 41 across the two states. What is the hedge ratio of the put? (Round your...

Q:

1. a. If, in a two-state model, a stock can take a price of 144 or 108, what would be the hedge ratio for each of the following prices: $144, $140, $130, $108? (Leave no cells blank - be certain to...

Q:

Data: S 0 = 108; X = 115; 1 + r = 1.12. The two possibilities for S T are 136 and 80. a. The range of S is 56 while that of P is 35 across the two states. What is the hedge ratio of the put? (Round...

Q:

Data: S0 = 109; X = 115; 1 + r = 1.08. The two possibilities for ST are 135 and 85. a. The range of S is 50 while that of P is 30 across the two states. What is the hedge ratio of the put? b. Form a...

Q:

Assuming a stock price of $154, what would be the hedge ratio for each of the following exercise prices: $154, $132, $110, $99? (Leave no cells blank - be certain to enter "0" wherever required....

Q:

Data: S 0 = 120; X = 132; 1 + r = 1.1. The two possibilities for S T are 150 and 96. 1 . The range of S is 54, while that of C is 18 across the two states. What is the hedge ratio of the call? (Round...

Q:

You manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 29%. The T-bill rate is 8%. Your client chooses to invest 65% of a portfolio in your fund and 35% in a...

Q:

A coil having a resistance of 150 and an inductance of 0.5H is connected in series with a capacitance of 50uF. Find a. the impedance of the circuit b. the current flowing when 250V, 50Hz is across...

Q:

6 friends went out for lunch. Their total bill was $42.90, including tax with a $10 bill. How much money will each person get back? Calculate

Q:

a Sketch a regular octagon. Describe the side length and symmetry properties of the octagon. b Sketch a parallelogram. Describe the side and angle properties of a parallelogram.

Q:

Marsden Inc., a Canadian public company, has 2020 Taxable Income of $362,000. It has permanent establishments in Ontario, Manitoba and the U.S. Its 2020 gross revenues and 2020 wages and salaries at...