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You would like to hold a protective put position on the stock of Ximera Corp to lock in a guaranteed minimum value of $50 at year-end. Ximera...
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Question

You would like to hold a protective put position on the stock of Ximera

Corp to lock in a guaranteed minimum value of $50 at year-end. Ximera currently sells for $50. Over the next year, Ximera's stock price will increase by 10% or decrease by 10%. The T-bill rate is 5%. Unfortunately, no put options are traded on Ximera Corp.


Suppose the desired put options with X = 50 were traded. What would be the hedge ratio for the option?

Step-by-step answer

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Subject: Business, Finance

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