Question 18 Compute the probability of the up-step: q = (S-Sd) / (Su-Sd) Enter as decimal Question 19 With the stock equal to 55 one week from now, the call value is Question 20 With the stock equal to 45 one week from now, the call value is Question 21 With the stock equal to 50 today, the call value is Question 22 Today, the delta (hedge ratio) is A = (Cu-Cd)/(Su - Sad) Question 23 A hedger who has just sold calls on 100 shares would buy shares
Question 18 Compute the probability of the up-step: q = (S-Sd) / (Su-Sd) Enter as decimal Question 19 With the stock equal to 55 one week from now, the call value is Question 20 With the stock equal to 45 one week from now, the call value is Question 21 With the stock equal to 50 today, the call value is Question 22 Today, the delta (hedge ratio) is A = (Cu-Cd)/(Su - Sad) Question 23 A hedger who has just sold calls on 100 shares would buy shares
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Consider a simple one-step binomial tree below, the numbers are stock prices. Today, the stock is at 50 and can go up to 55 and down to 45 over the next week, the expiry date. We are pricing a call struck at 49. Answer the next several questions related to the situation.
55
50
45
Transcribed Image Text:Question 18
Compute the probability of the up-step: q = (S-Sd) / (Su - Sd)
Enter as decimal
Question 19
With the stock equal to 55 one week from now, the call value is
Question 20
With the stock equal to 45 one week from now, the call value is
Question 21
With the stock equal to 50 today,
Question 22
value is
Today, the delta (hedge ratio) is A = (Cu-Cd)/(Su - Sd)
Question 23
A hedger who has just sold calls on 100 shares
would buy
shares
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