The current price of a non-divident paying stock is 30 over

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Reference no: EM13620593

The current price of a non-divident paying stock is $30. Over the next six months it is expected to rise to $36 or fall to $26. Assume the risk-free rate is zero.

i) What long position in the stock is necessary to hedge a long put option when the strike price is $32? Give the number of shares purchased as a percentage fo the number of options purchased option.

ii) What is the value of the put option?

iii) What is the risk neutral probability of the stock price moving up?

Reference no: EM13620593

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