Compute the deltas along all the possible stock paths

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Reference no: EM133674475

Question

Consider the following binomial tree. The numbers in squares are stock prices. The numbers in circles are option prices. Today, the stock is at 50 and can go up and down over the next week, and then again up and down from there. We are pricing a call struck at 46.

Fill in the call values in the circles. Compute the deltas along all the possible stock paths. Figure out your borrowing/lending at each node.

Reference no: EM133674475

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