Assume the Black-Scholes framework. For a 5-month European gap put option on a nondividend-paying stock, you are
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Assume the Black-Scholes framework. For a 5-month European gap put option on a nondividend-paying stock, you are given:
(i) The current price of the stock is 120.
(ii) The stock’s volatility is 20%.
(iii) The gap put option has strike price 110 and payment trigger 130.
(iv) The continuously compounded risk-free interest rate is 4%.
Calculate the current gamma of the gap put option.
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