Consider a two-state outcome for the following problem:                   Winterhold Publishing House       Current Stock Price $25.00        Exercise Price $27.00        Risk-free Rate 0.05       Share Price, High $30.00        Share Price, Low $20.00                  Required:         Using the data above, please find the hedge ratio. You currently own several shares of this company. The purchase puts according to the Hedge ratio to construct a non-random portfolio. Show the payoff for both outcomes, then solve for present value and the price of the put.

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Portfolio Management

Portfolio management is the process by which an investor decides that how the person will invest in a variety of assets in order to get a desired return in the future. A portfolio means a pool of assets that includes securities, bonds, and other investment instruments which helps in risk minimization of the money that has been invested. In other words, it can be said that a portfolio means a combination of assets in which an investor decides to invest their money in order to get a lump sum return in the future or even a series of cash flow that the person is expecting at the end of their job life.