Exam 11: Option Pricing: An Introduction

In a one-period binomial model,assume that the current stock price is $100,and that it will rise to $115 or fall to $80 after three months.If risk-free investment has a gross return of 1.005 per three month time-step,what is the best replicating portfolio of one hundred 101-strike three-month put options from the following options?

In a one-period binomial model,assume that the current stock price is $100,and that it will rise to $110 or fall to $90 after one month.If an investment of a dollar at the risk-free rate returns $1.001668 after one month,how many 100-strike one-month call options and how many units of the stock will be needed to be combined to obtain a riskless $1 portfolio?

In a one-period binomial model,assume that the current stock price is $100,and that it will rise to $110 or fall to $90 after one month.If the risk-neutral probability of the stock going up or down is equal,what is the one-month risk-free interest rate in continuously-compounded and annualized terms?

In the binomial model,if the stock moves up by a factor $\mathcal { U }$ and down by a factor $d$ ,and a $1 investment in a risk-free bond returns an amount $R$ per time step,which of the following statements is true in a market that is free from arbitrage?

In a one-period binomial model,assume that the current stock price is $100,and that it will rise to $110 or fall to $90 after one month.What is the delta of a 99-strike one-month put option?

Which of the following statements best describes the delta of vanilla options?