a.
To discuss: The payoff when the stock price goes up.
Introduction: Put option is contract that gives the owner of option the right to sell it at pre-decided rate within a specified time frame. It is not an obligation but the right to sell.
b.
To discuss: The payoff when the stock price falls.
Introduction: Put option is contract that gives the owner of option the right to sell it at pre-decided rate within a specified time frame. It is not an obligation but the right to sell.
c.
To discuss: Value of put option using risk-neutral shortcut.
Introduction: Put option is contract that gives the owner of option the right to sell it at pre-decided rate within a specified time frame. It is not an obligation but the right to sell.
d.
To discuss: Value of put option remain same using two-state approach.
Introduction: Put option is contract that gives the owner of option the right to sell it at pre-decided rate within a specified time frame. It is not an obligation but the right to sell.
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