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Business, 22.04.2020 03:43 Yeetious

Reconsider the determination of the hedge ratio in the two-state model where we showed that one-third share of stock would hedge one option. The possible end-of-year stock prices, uS0 = $85 (up state) and dS0 = $42 (down state). a. What would be the call option hedge ratio for each of the following exercise prices: $85, $70, $52, $42, given the possible end-of-year stock prices, uS0 = $85 (up state) and dS0 = $42 (down state)? (Round your answers to 3 decimal places.)

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