Given the risk-neutral process dS/S = rdt + odz, with o being constant, show that E(STST...ST...
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Given the risk-neutral process dS/S = rdt + odz, with o being constant, show that E(ST₁ST₂...ST | SO) = Sexp(-1(r + (k-i)o²)T), for T≥...> T₂ > T₁ (b) Consider an average price at time T defined as ht= = ((+)² + (²) where TZ U. Calculate the statistical moments M₁, M2, M3, and M4 of hr using the result in (a). Also, evaluate their numerical values based on the following market parameters. So= $1, r= 3% per year, o = 20% per year, U=0.50 year, and T = 1.00 year (c) Determine the approximated pricing formula for an Asian call option with payoff at maturity given by fr=max{hr-K, 0} Evaluate the numerical value of the approximated option price with strike K = $1.10. Act Go t Given the risk-neutral process dS/S = rdt + odz, with o being constant, show that E(ST₁ST₂...ST | SO) = Sexp(-1(r + (k-i)o²)T), for T≥...> T₂ > T₁ (b) Consider an average price at time T defined as ht= = ((+)² + (²) where TZ U. Calculate the statistical moments M₁, M2, M3, and M4 of hr using the result in (a). Also, evaluate their numerical values based on the following market parameters. So= $1, r= 3% per year, o = 20% per year, U=0.50 year, and T = 1.00 year (c) Determine the approximated pricing formula for an Asian call option with payoff at maturity given by fr=max{hr-K, 0} Evaluate the numerical value of the approximated option price with strike K = $1.10. Act Go t
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Related Book For
Microeconomics An Intuitive Approach with Calculus
ISBN: 978-0538453257
1st edition
Authors: Thomas Nechyba
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