4. Let S = ($120), K = ($100), = 30%, r = 0, and =...
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4. Let S = \($120\), K = \($100\), σ = 30%, r = 0, and δ = 0.08.
a. Compute the Black-Scholes call price for 1 year to maturity and for a variety of very long times to maturity. What happens to the price as T →∞?
b. Set r = 0.001. Repeat (a). Now what happens? What accounts for the difference?
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Related Book For
Derivatives Markets Pearson New International Edition
ISBN: 978-1292021256
3rd Edition
Authors: Robert L. Mcdonald
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