Data: S0 = 102; X = 115; 1 + r = 1.1. The two possibilities for ST are 146 and 84. Required: The range of S is 62 while that of P is 31 across the two states. What is the hedge ratio of the put? Form a portfolio of one share of stock and two puts. What is the (nonrandom) payoff to this portfolio? What is the present value of the portfolio? Given that the stock currently is selling at 102, calculate the put value.
Data: S0 = 102; X = 115; 1 + r = 1.1. The two possibilities for ST are 146 and 84. Required: The range of S is 62 while that of P is 31 across the two states. What is the hedge ratio of the put? Form a portfolio of one share of stock and two puts. What is the (nonrandom) payoff to this portfolio? What is the present value of the portfolio? Given that the stock currently is selling at 102, calculate the put value.
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 13QTD
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Question
Data: S0 = 102; X = 115; 1 + r = 1.1. The two possibilities for ST are 146 and 84.
Required:
- The range of S is 62 while that of P is 31 across the two states. What is the hedge ratio of the put?
- Form a portfolio of one share of stock and two puts. What is the (nonrandom) payoff to this portfolio?
- What is the present value of the portfolio?
- Given that the stock currently is selling at 102, calculate the put value.
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