Suppose that today's price of ABC stock is $100 and it is known that price moves up or down by a single multiple of 'u' and 'd' respectively in six-months. A riskless portfolio is comprising of delta stocks of ABC and a six-months CALL option on ABC stock with a strike price of $105. Finally, if risk-free rate is 12% per annum for all maturities and the annual variance of the underlying stock prices is 36%, complete the table below for nodes A, B and C: Your answer MUST be two decimal places. Nodes A B C Stock Price 100 $ $ Option Price $ $ Delta () ՄՌ ՄՌ $

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Suppose that today's price of ABC stock is $100 and
it is known that price moves up or down by a single
multiple of 'u' and 'd' respectively in six-months. A
riskless portfolio is comprising of delta stocks of
ABC and a six-months CALL option on ABC stock
with a strike price of $105. Finally, if risk-free rate is
12% per annum for all maturities and the annual
variance of the underlying stock prices is 36%,
complete the table below for nodes A, B and C:
Your answer MUST be two decimal places.
Nodes
A
B
C
Stock Price
100
$
Option Price
Delta ()
Total
en
$
Transcribed Image Text:Suppose that today's price of ABC stock is $100 and it is known that price moves up or down by a single multiple of 'u' and 'd' respectively in six-months. A riskless portfolio is comprising of delta stocks of ABC and a six-months CALL option on ABC stock with a strike price of $105. Finally, if risk-free rate is 12% per annum for all maturities and the annual variance of the underlying stock prices is 36%, complete the table below for nodes A, B and C: Your answer MUST be two decimal places. Nodes A B C Stock Price 100 $ Option Price Delta () Total en $
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