Exercise 16.3 The second term in the right-hand side of (16.7) is evaluated as

where L = log[F/A] − α0T. Show that

and

where ϕ(z) and Φ(z) denote the standard normal density and distribution functions, respectively, and zi, i = 3, . . . , 6, are defined below (16.8).

Transcribed Image Text:

E [A(T)1{r>TA(T)