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What is the fair price of this call option

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Consider a 1-period BOPM where a period is 1 year. The current stock price is 40. The stock could up by 20% (u=1.2) or down by 10% (0.9) and the risk-free rate is 8%. The strike price of a call option is 45. What is the hedge ratio?

Consider a 1-period BOPM where a period is 1 year. The current stock price is 40. The stock could up by 20% (u=1.2) or down by 10% (d=.9) and the risk-free rate is 8%. The strike price of a call option is 45. What is the fair price of this call option?

Reference no: EM132641693

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