In a One-Period Binomial Model, Assume That the Current Stock

question 19

Multiple Choice

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?

• A) Short 60 shares of stock and long 69 units of $1 bonds.
• B) Short 65 shares of stock and long 70 units of $1 bonds.
• C) Short 65 shares of stock and short 69 units of $1 bonds.
• D) Short 65 shares of stock and short 70 units of $1 bonds.

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UCC

The Uniform Commercial Code (UCC) is a set of laws that provide legal standards and regulations for commercial transactions and dealings across the United States.

ATM Machine

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Safe Harbor Defense

A legal provision that shields companies from liability under certain conditions if they can prove they acted in good faith or complied with specified regulations.

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The costs imposed by a service provider on its clients for the services offered.