Assume the Black-Scholes framework. For t 0, let S(t) be the time-t price of a nondividend-paying

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Assume the Black-Scholes framework. For t ≥ 0, let S(t) be the time-t price of a nondividend-paying stock. You are given:

(i) S(0) = 100.

(ii) Var[ln S(t)] = 0.16t, for t ≥ 0.

(iii) The continuously compounded risk-free interest rate is 6%.

Calculate the current volatility of a 105-strike 1-year European call option.

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Derivative Pricing

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Authors: Ambrose Lo

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Question Posted: Nov 22, 2023 08:17 AM

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Assume the Black-Scholes framework. For t 0, let S(t) be the time-t price of a nondividend-paying

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Derivative Pricing

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