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Homework answers / question archive / European call option with zero strike price) In the one-period model, determine the price at time zero of the derivative security whose time-one payoff is S1
European call option with zero strike price) In the one-period model, determine the price at time zero of the derivative security whose time-one payoff is S1. That is, the derivative security pays off the stock price, so this is a European call option that expires at time 1 and whose strike price is K = 0. Explain your result.
A call option with strike zero is basically the underlying stock itself. Hence, the price at time zero is basically the price of stock at time zero. Price is S0
