Find the option price using a replicating portfolio

Assignment Help Finance Basics

Reference no: EM13281407

If we are given a stock (price 1)that we are allowed to trade halfway with probability .5 in which the halfway maturities are 2 and .5, and then the full maturities are 4,1,1,.25 with probability of .5 for each again. We have a call option c with maturities 3,0,0,0 (respective to the stock maturities) with a .25 probability. How do we find the option price using a replicating portfolio?

Reference no: EM13281407

Questions Cloud

In the channel routing my muskingum method : In the channel routing my Muskingum method, the value of routing coofetirnts Co and C1 are estimated as -0.2 and 0.5 respectively. The value of third coeffiteint would be ?

What will be the increase in pre-tax profits : A project has fixed costs of $1.000 per year, depreciation charges of $500 a year, revenue of $6,000 a year, and variable costs equal to two-thirds of revenues. If sales increase by 10%, what will be the increase in pre-tax profits?

What was the trucks initial speed : A semitrailer is coasting downhill along a mountain highway when its brakes fail. What was the truck's initial speed

Capstone research project : Capstone Research Project

Find the option price using a replicating portfolio : If we are given a stock (price 1)that we are allowed to trade halfway with probability .5 in which the halfway maturities are 2 and .5, and then the full maturities are 4,1,1,.25 with probability of .5 for each again.

Determine what is the approximate bit error probability : Consider a 16-ary PSK system with symbol error probability PE=10-5. A Gray code is used for the symbol to big assignment. What is the approximate bit error probability. Repeat for a 16-ary orthogonal FSK system.

Determine the average induced emf in the secondary coil : A very long, straight solenoid with a cross-sectional area of 5.75cm^2 is wound with 36 turns of wire per centimeter, What is the average induced emf in the secondary coil

Define concentrated hcl is a solution of hcl in water : Concentrated HCl is a 12.0 M solution of HCl in water. How many milliliters of concentrated HCl must be diluted to 250 mL so that the resulting solution is 0.0500 M in HCl

Determine cross sectional area of core of trnasformer : A 2000 kVA, 4800-600V, 60 Hz, core type transformer operating at no load in the step down mode draws a magnetizing current equal to 2 percent rated current. The core has a mean length of 3.15meters, and operated at a flux density of 1.55 T.

User Account

All Pages