Reconsider the determination of the hedge ratio in the two-state model where we showed that one-third...
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Reconsider the determination of the hedge ratio in the two-state model where we showed that one-third share of stock would hedge one option. The possible end-of-year stock prices, use = $105 (up state) and dSo $64 (down state). Required: a. What would be the call option hedge ratio for each of the following exercise prices: $105, $91, $82, $64, given the possible end-of- year stock prices, use $105 (up state) and dSe = $64 (down state)? = b. What do you conclude about the hedge ratio as the option becomes progressively more in the money? Complete this question by entering your answers in the tabs below. Required A Required B What would be the call option hedge ratio for each of the following exercise prices: $105, $91, $82, $64, given the possible end-of-year stock prices, use = $105 (up state) and dSe = $64 (down state)? Note: Round your answers to 3 decimal places. Exercise Price Hedge Ratio $ 105 SSS 91 $ 82 64 Reconsider the determination of the hedge ratio in the two-state model where we showed that one-third share of stock would hedge one option. The possible end-of-year stock prices, use = $105 (up state) and dSo $64 (down state). Required: a. What would be the call option hedge ratio for each of the following exercise prices: $105, $91, $82, $64, given the possible end-of- year stock prices, use $105 (up state) and dSe = $64 (down state)? = b. What do you conclude about the hedge ratio as the option becomes progressively more in the money? Complete this question by entering your answers in the tabs below. Required A Required B What would be the call option hedge ratio for each of the following exercise prices: $105, $91, $82, $64, given the possible end-of-year stock prices, use = $105 (up state) and dSe = $64 (down state)? Note: Round your answers to 3 decimal places. Exercise Price Hedge Ratio $ 105 SSS 91 $ 82 64
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