A stock that not pay any dividend is currently trading at $60. After one period, the...

A stock that not pay any dividend is currently trading at $60. After one period, the price will either increase by 20% or decrease by 20%. The risk-free rate is 8% per period (not continuously compounded). Consider a European put option on the stock with strike price of $66. Set up a replicating portfolio and price the option.

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A stock is currently trading at $80. After one period, the price will either increase by...

A stock is currently trading at $80. After one period, the price will either increase by 20% or decrease by 20% and the stock does not pay any dividend. The risk-free rate per period is 2%. Consider a put option on the stock with strike price of $70. Set up a replicating portfolio and price the option.

q 20 A non-dividend paying stock is currently trading at $60 and its volatility is 20%...

q 20 A non-dividend paying stock is currently trading at $60 and its volatility is 20% per annum. Risk free rate is 12% per annum. Consider a European call option with a strike price of $58 that will expire in three months. What is the price of this call option based on Black-Scholes model? (Enter your answer in two decimals without $ sign)

1. [Valuing a Put Option] Suppose a stock is currently trading for $60, and in one...

1. [Valuing a Put Option] Suppose a stock is currently trading for $60, and in one period will either go up by 20% or fall by 10%. If the one-period risk-free rate is 3%, what is the price of a European put option that exprires in one period and has an exercise price of $60? 2. Suppose the uncertainty involves two possible states (0- = 1,2) with equal probability 0.5. The investment A produces a state-contingent rate of return 3%...

Stock that doesn't pay a dividend is trading at $5. A riskless bond that will pay...

Stock that doesn't pay a dividend is trading at $5. A riskless bond that will pay $100 after a year is trading at $94. A European call option on the stock with strike price of $60 and one year to maturity is trading at $6.1. Devise an arbitrage strategy and prove that it works in all scenarios.

A stock that does not pay dividend is trading at $100. The stock price will increase...

A stock that does not pay dividend is trading at $100. The stock price will increase by 10% or decrease by 10% in one year. After that, the stock price will increase or decrease by 20% in the second year. The risk-free interest rate is 5% per annum with continuous compounding. Value a two-year American put option with strike price of $102. Note that risk-neutral probabilities or replicating portfolios may differ across two periods. You must also check for early...

A stock that does not pay a dividend is trading at $73.50. A riskless bond that...

A stock that does not pay a dividend is trading at $73.50. A riskless bond that will pay $100 after a year is trading at $97. A European call option on the stock with strike price of $65 and one year to maturity is trading at $5.00. Propose an arbitrage strategy and prove that it is an arbitrage strategy.

A stock that does not pay dividend is trading at $73.1. A riskless bond that will...

A stock that does not pay dividend is trading at $73.1. A riskless bond that will pay $100 after a year is trading at $97. A European call option on the stock with strike price of $64 and one year to maturity is trading at $5.8. Propose an arbitrage strategy and prove that it is an arbitrage strategy.

Stock XYZ is currently trading at $50. A JUN 60 call option on the stock is...

Stock XYZ is currently trading at $50. A JUN 60 call option on the stock is quoted at $12.65. The delta on the call is 0.5866, and its gamma is 0.0085. At the same time, a JUN 65 call option on this stock is quoted at $17.75 with a delta of 0.5432 and gamma of 0.0089. You currently have a short position on the JUN 60 call for 60 contracts. The risk-free rate is 5%. (1) Construct a hedging strategy...

A stock that does not pay dividend is trading at $20. A European call option with...

A stock that does not pay dividend is trading at $20. A European call option with strike price of $15 and maturing in one year is trading at $6. An American call option with strike price of $15 and maturing in one year is trading at $8. You can borrow or lend money at any time at risk-free rate of 5% per annum with continuous compounding. Devise an arbitrage strategy.

Nell Corporation stock is currently selling for $18.50. The stock is expected to pay a dividend...

Nell Corporation stock is currently selling for $18.50. The stock is expected to pay a dividend of $75 at the end of the year. Dividends are expected to grow at a constant rate of 4% indefinitely. Compute the expected rate of return on Nell Corporation stock.

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