User Account

All Pages

What is the price per share of the put option

Assignment Help Finance Basics
Reference no: EM132842831

The price of Alexion stock is $62 per share. The riskless interest rate for continuous compounding is 2% and the stock's volatility is 25%. Alexion stock does not pay dividends.

(a) A put option on Alexion stock expires in six months, has a strike price equal to $65 per share, and is European exercise style. Using a binomial tree with two time steps, what is the price per share of the put option? Use replication to answer this question.

(b) Suppose the option contract size is 100 shares of stock. Use your ? and B at each node of your binomial tree to describe the portfolio strategy that replicates the put option in part (a). In other words, what is your stock position at each node? How much should you borrow or lend at each node? How should you rebalance your portfolio at each node?

Reference no: EM132842831

Questions Cloud

Give or prepare all entries in the books of the franchisor : Give or prepare all entries for 2021 in the books of the franchisor under the following assumptions: The collection of the note is reasonably assured
What issues led to the louisiana purchase : What issues led to the Louisiana Purchase. Why was Jefferson reluctant to agree to the purchase? Why did he ultimately agree to it?
How does the work of pollock and judd differ : What is Donald Judd communicating in his piece titled 100 Untitled Works in Mill Aluminum? What do you think the content is? How does the form help the artist.
Describe the american great migration movement : Describe the American "Great Migration" movement; and what were some of the motivations or reasons for this ‘demographic shift' of many African Americans?
What is the price per share of the put option : The price of Alexion stock is $62 per share. The riskless interest rate for continuous compounding is 2% and the stock's volatility is 25%. Alexion stock does n
How each teacher incorporates group motivation : Use the questions on the "Clinical Field Experience D: Behavior Management" template to guide your observation in each classroom.
Prepare flexible budget performance report : Prepare flexible budget performance report for the Housekeeping department that compares actual costs and standard allowed based on actual usage
What is the synthetic forward price of uk pound : Given the rates above what should the manager's actions be if the goal is to lock-in future US dollar revenue at the best possible exchange rate?
What is the no-arbitrage futures exchange rate : You work as a trader for the arbitrage desk at Goldman Sachs, monitoring spot and futures foreign exchange rates. At 9am Eastern time you observe the following

Reviews

Write a Review

Finance Basics Questions & Answers

  Will this bond be priced as discount bond or a premium bond

Will this bond be priced as a discount bond or a premium bond? Explain ? Why may a bond's price change simply because of the passage of time?. What is the difference between a bond's current yield and its yield to maturity?

  What types processes-procedures support project management

What types processes or procedures support project management, continuous improvement and innovative initiative

  Compute the taxable income for given year

Pat was divorced from her husband in 2002. During the current year she received alimony of $18,000 and child support of $4,000 for her 11-year-old son.

  An investor receives a 15 total return by purchasing a

an investor receives a 15 total return by purchasing a stock for 40 and selling it after one year with a 5 capital

  Show that a firm with earnings

Show that a firm with earnings of $8 per share a year in perpetuity would be better off paying all earnings in dividends rather than investing.

  Annual internal rate of return

BBM sells it for $2,900mm at that time. What was the annual internal rate of return that BBM earned on this investment?

  What is the minimum estimated value

Question 3 :Restful Industries has offered $12 million cash for all the ordinary shares in Sofa Distribution Pty Ltd. Based on recent market information, Sofa Distribution is worth $8 million as an independent operation. If the merger makes economic ..

  Compute the exponentially smoothed forecast of calls for

emergency calls to winter park floridas 911 systems for the past 24 weeks are as followsa compute the exponentially

  Calculate the weight return and risk for minimum variance

Construct an investment portfolio through allocating different weights to the two stocks you picked up. Calculate weight return and risk for minimum variance

  Explain the concept of constructive dividends

Explain the concept of constructive dividends. Give examples. Construct three original examples of situations in which the IRS might claim constructive.

  To improve your current editing skills what are some of

to improve your current editing skills what are some of your weak areas? what are some of your weak areas when it comes

  What order quanity would a firm choose if the firm owned

zamatia ltd. is an italian upscale maker of eyewear. uv inc. is one of their retailers in the us. considering zamatias

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd