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A contract that gives the owner the right, but not the obligation, to buy or sell a security at a fixed price in the future.
0
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Why don't real-world probabilities affect the price of a call in a 1-step binomial model?
To use this method of valuing options, we assume risk neutral probability for calculating expectation of payoff and discount it with the risk free rate to arrive at the final value. …
-1
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delta hedging strategy for OTM option
Delta hedging implies, loosely speaking, buying a proportion (delta) such that small movements in underlying have no net impact.
What you have done with 100% and 0% is, in effect, bought the shares to …