What is the hedge ratio, FINE 711 Tulane University What

What is the hedge ratio

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Reference no: EM133326234

Case: Assume the stock price today is $100, the stock price is $110 and the risk-free rate is 10%. The stock can go up or down by 20%. Assume a one-period model, and you are evaluating a call option.

What is the hedge ratio?
what is the hedge portfolio of calls and stock and what is the payoff?
Given that the stock is currently trading at $100, solve for the value of the call.
Using the put-call parity, what is the price of the put?
What is the value of the bond? Borrow or lend?

Reference no: EM133326234

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What is the hedge ratio : FINE 711 Tulane University What is the hedge ratio? what is the hedge portfolio of calls and stock and what is the payoff

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