A stock price is currently $80. It is known that at the end of four months it will be either $75

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A stock price is currently $80. It is known that at the end of four months it will be either $75
  • A stock price is currently $80. It is known that at the end of four months it will be either $75

  • Answers • 3 pages • 2020
  • A stock price is currently $80. It is known that at the end of four months it will be either $75 or $85. The risk-free interest rate is 5% per annum with continuous compounding. What is the value of a four-month European put option with a strikeprice of $80? Use no-arbitrage arguments.
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  • $3.49
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