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Suppose that the current price of an asset is $80. After six months, there are two...

Suppose that the current price of an asset is $80. After six months, there are two possible scenarios: S+ =$100 and S- = $50. The exercise price of the call option is $90 and its expiration date is six months from now. The annual risk-free rate is 2%.

What is the hedge ratio?

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Answer #1

ANSWER IN THE IMAGE ((YELLOW HIGHLIGHTED). FEEL FREE TO ASK ANY DOUBTS. THUMBS UP PLEASE.

HEDGE RATIO= 0.20

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