(a) Make a chart similar to Fig. 6.9 showing the price of a put option using a...
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(a) Make a chart similar to Fig. 6.9 showing the price of a put option using a difference IG model for stock prices versus the GBM model. Use a− = a+ = 41 and b− = b+ = 8. What are the mean and variance of the difference IG process?
(b) Do the same for calls.
Data Given in Figure 6.9
Transcribed Image Text:
a 16 12 8 0 90 lambda(days)= 0.10 jump mean= 1.003 jump std= 0.020 100 110 vanilla put 120 O 16 12 8 A D 80 90 lambda(days) 0.10 jump mean= 1.003 jump std= 0.020 100 vanilla call 110
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Difference IG Model vs GBM Model The GBM Geometric Brownian Motion model is a widely used model for stock prices that assumes continuousrandom price m...View the full answer
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