What is the hedge ratio of the put

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We will derive a two-state put option value in this problem. Data: S0 = 150; X = 160; 1 + r = 1.1. The two possibilities for ST are 180 and 100.

a. The range of S is 80 while that of P is 60 across the two states. What is the hedge ratio of the put? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.)

Hedge ratio            

b-1. Form a portfolio of 3 shares of stock and 4 puts. What is the (nonrandom) payoff to this portfolio? (Round your answer to 2 decimal places.)

Nonrandom payoff            $

b-2. What is the present value of the portfolio? (Round your answer to 2 decimal places.)

Present value            $

c. Given that the stock currently is selling at 150, calculate the put value. (Round your answer to 2 decimal places.)

Put value            $

Reference no: EM131923794

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