# A market has two stocks S1 and S2. Both S1 and S2 are valued at \$1 per unit today andcan be worth ei

A market has two stocks S1 and S2. Both S1 and S2 are valued at \$1 per unit today andcan be worth either \$2 or \$0.5 per unit after one year. Assume that money M valued at \$1per unit today does not change its value during that time.(a) Suppose a convertible bond B that pays either \$2 when S1 = \$2 or \$1 whenS1 = \$0.5 in a year is also traded in the market.(i) Calculate the portfolio (S1;M) that replicates B using matrix inverses.(ii) Calculate the price of convertible bond B.(b) Suppose an option O1 that pays \$1 when both S1 = S2 = \$2 (and 0 otherwise)is traded in the market and is worth \$0.125. Also suppose option O2 that pays \$1 whenS1 = \$2 but S2 = \$0.5 (and 0 otherwise) is traded in the market as well.(i) Calculate the portfolio (S1;S2;M;O1) that replicates O2 using row reduction.(ii) Calculate the price of option O2.

Don't use plagiarized sources. Get Your Custom Essay on
A market has two stocks S1 and S2. Both S1 and S2 are valued at \$1 per unit today andcan be worth ei
Just from \$13/Page
Calculate the Price of your PAPER Now
Pages (550 words)
Approximate price: -

Why Choose Us

Top quality papers

We always make sure that writers follow all your instructions precisely. You can choose your academic level: high school, college/university or professional, and we will assign a writer who has a respective degree.

We have hired a team of professional writers experienced in academic and business writing. Most of them are native speakers and PhD holders able to take care of any assignment you need help with.

Free revisions

If you feel that we missed something, send the order for a free revision. You will have 10 days to send the order for revision after you receive the final paper. You can either do it on your own after signing in to your personal account or by contacting our support.

On-time delivery

All papers are always delivered on time. In case we need more time to master your paper, we may contact you regarding the deadline extension. In case you cannot provide us with more time, a 100% refund is guaranteed.

Original & confidential

We use several checkers to make sure that all papers you receive are plagiarism-free. Our editors carefully go through all in-text citations. We also promise full confidentiality in all our services.

Our support agents are available 24 hours a day 7 days a week and committed to providing you with the best customer experience. Get in touch whenever you need any assistance.

Try it now!

## Calculate the price of your order

Total price:
\$0.00

How it works?

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Our Services

No need to work on your paper at night. Sleep tight, we will cover your back. We offer all kinds of writing services.