Set up a one-period binomial tree for a put option. Use the following information about the underlying stock price and the risk-free interest rate. What is the current value of the hedge portfolio? Do
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Set up a one-period binomial tree for a put option. Use the following information about the underlying stock price and the risk-free interest rate. What is the current value of the hedge portfolio? Does it grow at a risk-free rate over time?
price=59
strike price (x)= 60
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Order Paper Nowup (u)= 1.15
down (d)= .85
r= .05
