Question: We will derive a two-state put option value in this problem. Data: 5o = 130; X = 140; 1 + r = 11. The two

We will derive a two-state put option value in this problem.

We will derive a two-state put option value in this problem. Data: 5o = 130; X = 140; 1 + r = 11. The two possibilities for Sare 170 and 95. a. The range of Sis 75 while that of Pis 45 across the two states. What is the hedge ratio of the put? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.) Hedge ratio b. Form a portfolio of 3 shares of stock and 5 puts. What is the (nonrandom) payoff to this portfolio? (Round your answer to 2 decimal places.) Nonrandom payoff c. What is the present value of the portfolio? (Round your answer to 2 decimal places.) Present value d. Given that the stock currently is selling at 130, calculate the put value. (Round your answer to 2 decimal places.)

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!

We will derive a two-state put option value in this problem. Data: S 0 =100, X=110, r f =10% . The two possibilities for S T are 130 and 80. Show the payoff of the put in each of the two possible...

We will derive a two-state put option value in this problem. Data: S 0 = 130; X = 140; 1 + r = 1.1. The two possibilities for S T are 170 and 95. a. The range of S is 75 while that of P is 45 across...

We win derive a two-state put option value m this problem Data S_0 = 130; X= 140; 1 + t = 1.1. The two possibilities for S_t are 170 and 95. The range of S is 75 while that of P is 45 across the two...

14 We will derive a two-state put option value in this problem. Data: 5o = 100; X= 1101 + r = 110. The two possibilities for Spare 130 and 80. o. The range of Sis 50 while that of Pis 30 across the...

We will derive a two-state put option value in this problem. Data: S 0 = $130; X = $140; 1 + r = 1.10. The two possibilities for S T are $170 and $95. Required: a. The range of S is $75 while that of...

We will derive a two-state put option value in this problem. Data: S = $130; X = $140; 1+r=1.10. The two possibilities for ST are $170 and $95. Required: a. The range of S is $75 while that of P is...

We will derive a two-state put option value in this problem. Data: 5o = 180; X=1901 + r= 11. The two possibilities for Sy are 210 and 110 a. The range of Sis 100 while that of Pis 80 across the two...

We will derive a two-state put option value in this problem. Data: 5o = $220; X = $230; 1 + r= 1.10. The two possibilities for Spare $250 and $150. Required: a. The range of Sis $100 while that of...

= We will derive a two-state put option value in this problem. Data: 5o = $280; X = $290; 1 + r= 1.10. The two possibilities for Spare $320 and $200. Required: a. The range of Sis $120 while that of...

We will derive a two-state put option value in this problem. Data: 5o = $200; X = $210; 1 + r= 1.10. The two possibilities for S, are $230 and $180. Required: a. The range of Sis $50 while that of...

Explain how goals and plans differ according to organisational level. Describe how goals and plans may be different at various management levels at your college or university.

The fat content of a pouch of Keebler Right Bites Fudge Shoppe Mini-Fudge Stripes is normally distributed with a mean of 3.50 grams. Assume a known standard deviation of - 0.25 gram. (a) What is...

Debentures can be offered to the public only if the application form is accompanied by a prospectus.True or false

On 1 March 2007 DB Limited issued R560 000 15% debentures at R98. The debentures were to be redeemed at par in four equal annual payments starting 28 February 2010. Required: Journalise the above...