A stock price is currently $100. It is known that at the end of 1 month it will be either $90 or $110. The risk-free rate of interest is 6% per annum with continuous compounding. Compute the price of a 1-month European put option with a strike price of $95 using no- arbitrage arugments. (Note: You need to construct riskless portfolio then apply no-arbitrage arguments, in particular you need to compute the "delta" of this option.)
A stock price is currently $100. It is known that at the end of 1 month it will be either $90 or $110. The risk-free rate of interest is 6% per annum with continuous compounding. Compute the price of a 1-month European put option with a strike price of $95 using no- arbitrage arugments. (Note: You need to construct riskless portfolio then apply no-arbitrage arguments, in particular you need to compute the "delta" of this option.)
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
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