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Derivatives and Risk Management, 1st Edition
book

Derivatives and Risk Management, 1st Edition

by Sundaram Janakiramanan
May 2024
Intermediate to advanced content levelIntermediate to advanced
542 pages
27h 26m
English
Pearson India
Content preview from Derivatives and Risk Management, 1st Edition
340 Derivatives and Risk Management
On the expiry date:
e value of the call will be Max [(S
T
S
X
), 0] = Max [(S
T
– 2,400), 0]. is means that the value of the
call on the expiry date will be zero for all stock prices below INR 2,400 and the value will increase by INR
1 for each INR 1 increase in the stock price beyond INR 2,400.
e value of the risk-free investment will be S
X
× exp(–rt) × exp(rt) = S
X
, or the exercise price.
e cash ows associated with this strategy are shown in Table 14.2.
Table 14.2 shows that the risk-free security provides a minimum portfolio value of INR 2,400 or
provides an insurance against the unfavo ...
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Publisher Resources

ISBN: 9781299447547Publisher Website