The volatility of non-dividend-paying stock whose price

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The volatility of a non-dividend-paying stock whose price is $78, is 30%. The risk-free rate is 3% per annum (continuously compounded) for all maturities. Calculate values for u, d, and p when a 2-month time step is used. What is the value a 4-month European call option with a strike price of $80 given by a two-step binomial tree. Suppose a trader sells 1.000 options (10 contracts). What position in the stock is necessary to hedge the trader's position at the time of the trade?

Reference no: EM131355374

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