Hedge the trader position at the time of the trade

Assignment Help Financial Management

Reference no: EM131545539

The volatility of a non-dividend-paying stock whose price is $78, is 30%. The risk-free rate is 3% per annum (continuously compounded) for all maturities. Calculate values for u, d, and p when a two-month time step is used. What is the value of a four-month European call option with a strike price of $80 given by a two-step binomial tree. Suppose a trader sells 1,000 options (10 contracts). What position in the stock is necessary to hedge the trader’s position at the time of the trade?

Reference no: EM131545539

Questions Cloud

The model in ethical decision making : A critical analysis of the ethical decision-making model (i.e., analyze the strengths and weaknesses of the model in ethical decision making).

Security with equal payments at the end of each year : A 6-year bond with annual coupons at a rate of r%, redeemable at par. A 10-year security with equal payments at the end of each year. Calculate r.

Describe steps you can use to resolve conflicts : List and describe steps you can use to resolve conflicts. 100-200 Words please

Calculate macaulay duration : You are given a ten-year bond which is redeemed at par. Calculate the Macaulay duration.

Hedge the trader position at the time of the trade : What position in the stock is necessary to hedge the trader’s position at the time of the trade?

Why an organization may have a need for distributed database : List three reasons why an organization may have a need for distributed databases and best practices for implementation of distributed database.

Describe how cost-demand dynamics might impact two schools : Describe how cost and demand dynamics might impact these two schools in the future and steps they can take to achieve their goal.

Research risk assessments : As part of a consulting agreement for a public university that offers a significant number of online programs, you are tasked with producing a risk assessment.

Chairmanship of the university hospital : A physician at the University of California was removed from the chairmanship of the university hospital's radiology department in the wake of accusations.

User Account

All Pages