The CSI 300 Index is currently trading at 4,150. The continu- ously compounded risk-free rate is...

 

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The CSI 300 Index is currently trading at 4,150. The continu- ously compounded risk-free rate is r = 0.06. The price of a European call option on the CSI 300 Index expiring in one year with a strike price of 4,150 is 437.50 CNY. You have decided to invest 10,000 CNY in an equity-linked CD maturing in 6 months that guarantees the return of your original investment plus a certain percentage of any upside gain in the CSI 300 Index over the year. If the market is arbitrage-free, what percentage of any upside gain in the CSI 300 Index over the year do you expect to receive? i.e. what is the participation rate? The CSI 300 Index is currently trading at 4,150. The continu- ously compounded risk-free rate is r = 0.06. The price of a European call option on the CSI 300 Index expiring in one year with a strike price of 4,150 is 437.50 CNY. You have decided to invest 10,000 CNY in an equity-linked CD maturing in 6 months that guarantees the return of your original investment plus a certain percentage of any upside gain in the CSI 300 Index over the year. If the market is arbitrage-free, what percentage of any upside gain in the CSI 300 Index over the year do you expect to receive? i.e. what is the participation rate?