What is the hedge ratio and what does it signify

Reference no: EM133615868

Problem: Suppose the stock price today is $50, in year time the stock price goes up to $77.65 and goes down to $48.47, dollar rate of return in one year is 1.0513. Set up a perfect hedge and compute the put option's value using the synthetic approach. Let the put have the same strike price K =$65. What is the hedge ratio? What does it signify?

Reference no: EM133615868

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