Consider a call option on Stock X. The call expires in 7 months and has a strike price X=$22.  The current price of stock X is $20. In 7 months, the stock price can either go up to 23 (up state) or go down to $19 (down state). The call premium in the 2 states :  $1 in the up state and $0 in the down state. Assume that the risk-free rate is 12% per annum. Calculate the hedge ratio. (Please report your answer using 2 decimals) Continuation of Question 1.Calculate the value of the call in period 0.  (Hints: Use continuous discounting when calculating present value. Also, please report your answer using 4 decimals)

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Treasury Market

On-the-run securities are the most recently issued securities in the market depth and are therefore traded at some premium. The off-the-run securities are the ones issued just before the most recent ones. The on-the-run securities have a lower yield to the investor than the off-the-run securities.