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What is the hedge ratio what is the hedge portfolio of calls

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Question: 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.

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

 

Reference no: EM133332076

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