What is the risk neutral probability p

Reference no: EM13267043

A stock is currently priced at $100. Over each of the next two three month periods it is expected to increase by 10% or fall by 10%. Consider a six month call option with a strike of $95. The risk free rate is 8% per annum.

a)What is the risk neutral probability p?

b)What is the call price?

Show your work please

Reference no: EM13267043

Questions Cloud

Determine the diameter of the hose : Water flowing through a hose at 4.0 m/s fills a 800L child's wading pool in 7.0min. What is the diameter in cm of the hose

Define what is the activation energy for the reaction : if the observed rate constant for the oxidation reaction at 35 C is 6.75*10^-2 min^-1, and at 25 C is 3.25*10^-2 min ^-1. what is the activation energy for the reaction

How much energy is stored in catapult just before release : In use its arms are stretched to three times their original length before release. Assume the the modulus of rubber is 10-3 GPa and that it does not change when the rubber is stretched. How much energy is stored in the catapult just before release

What must the angle of incidence be : A square room has 3 mirrored walls of length L with one side missing. A laser is fired from the center of the open side of the room with an angle of incidence, I, what must the angle of incidence be

What is the risk neutral probability p : A stock is currently priced at $100. Over each of the next two three month periods it is expected to increase by 10% or fall by 10%. Consider a six month call option with a strike of $95. The risk free rate is 8% per annum.

What is the hedge ratio of the put option : Consider a six month put option on a stock with a strike price of $32. The current stock price is $30 and over the next six months it is expected to rise to $36 or fall to $27. The risk free rate is 6%.

What was the proton''s speed as a fraction : The highest-energy cosmic ray ever detected had an energy of about 3.0x10^20 eV. Assume that this cosmic ray was a proton. What was the proton's speed as a fraction of c

Determine what value of current to limit the led : An LED with a rated range of Vf = 1.4 V to 1.8 V at If = 20 mA is connected to a driver circuit with a peak output of 14 V. What value of current. limiting resistor would be needed to limit the LED current to a maximum value of 20 mA.

Explain how many replicate determinations are necessary : A certain technique is known to have a mean of 0.500 and standard deviation of 1.84*10^-3. itis also known that Gaussian statistics apply. How many replicate determinations are necessary if the standard error of the mean is not to exceed 0.100%

User Account

All Pages