5 thus the options equivalent buys 05 shares in

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Unformatted text preview: over the spread in stock prices: (49) Option delta spread in option val ue spread in stock price Download free ebooks at bookboon.com 80 Corporate Finance Options Example: - In the prior example with the 3-month option on the Google stock the option delta is equal to: Option delta - spread in option val ue spread in stock price >100  0@ >500  300 @ 0 .5 Thus, the options equivalent buys 0.5 shares in Google and borrow $150 to replicate the payoffs from the option on the Google stock. 9.3.1 Binominal method of option pricing The binominal model of option pricing is a simple way to illustrate the above insights. The model assumes that in each period the stock price can either go up or down. By increasing the number of periods in the model the number of possible stock prices increases. Turning a challenge into a learning curve. Just another day at the office for a high performer. Please click the advert Accenture Boot Camp – your toughest test yet Choose Accenture for a career where the variety of opportunities and challeng...
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