Assume the Black-Scholes framework. You are given: (i) The current price of a nondividend-paying stock is 80.

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Assume the Black-Scholes framework. You are given:

(i) The current price of a nondividend-paying stock is 80.

(ii) The stock’s volatility is 30%.

(iii) The continuously compounded risk-free interest rate is 8%.

(a) Calculate the price of a 1-year knock-out European put option with a barrier of 75 and a strike of 70.

(b) Calculate the price of a 1-year knock-in European put option with a barrier of 75 and a strike of 70.

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Derivative Pricing

ISBN: 9780367734213

1st Edition

Authors: Ambrose Lo

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Question Posted: Dec 07, 2023 06:08 AM

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Assume the Black-Scholes framework. You are given: (i) The current price of a nondividend-paying stock is 80.

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a Knockout European put option 1 Calculate d and d d In8070008030721 05994 030x1 d d 0...View the full answer

Derivative Pricing

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