Why the two real world discount rates are so different

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Reference no: EM131237442

Footnote 1 shows that the correct discount rate to use for the real-world expected payoff in the case of the call option considered in Figure 12.1 is 42.6%.

Show that if the option is a put rather than a call the discount rate is -52:5%. Explain why the two real-world discount rates are so different.

Reference no: EM131237442

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