Find the no arbitrage value of the call option using bop

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Consider ABC stock is currently selling at $180. Assume that we are in a binomial world and next period the stock can either increase by 30% or decrease by 20%. Assume also that there is a call option with an exercise price of $122 and risk free interest rate is 4%.

i. Find the no arbitrage value of the call option using BOP.

ii. Suppose the call option currently is trading at $16 in the market. What amount of riskless return can be earned using a riskless hedge.

Reference no: EM131893202

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