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What is the no-arbitrage price of the put option

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You are trying to price a one period at-the-money put option on a (non-dividend paying) asset. The current underlying price is $65 and at the end of the period the price will either fall to $50 or rise to $90. The risk-free interest rate for one period is 2%.

Question i. What is the no-arbitrage price of the put option? Explain each of the steps in your pricing analysis as you perform them.

Question ii. What is the delta on the put and what is the interpretation of that figure?

Reference no: EM132523045

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