Recalculate Table 4.2 for barrier options assuming prices follow a jump diffusion model with normal sized jumps.
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Recalculate Table 4.2 for barrier options assuming prices follow a jump diffusion model with normal sized jumps. Recall that the simulation must go event by-event.
Data given in table 4.2
Transcribed Image Text:
Table 4.2 So = 100, K = 100, rf = 3% Barrier versus European option prices Type Barrier Expiry (days) Call 95 Call 95 Call 95 Call 90 Put 105 60 60 90 60 60 Vol. (%) At(days) Barrier price 0.05 0.005 0.005 0.05 0.05 20 40 20 20 20 3.09 4.04 3.53 3.48 2.57 European 3.48 6.70 3.32 3.48 2.99
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Key Considerations Traditional Table 42 This table likely contains barrier option prices for European or American options under a standard diffusion m...View the full answer
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