For t 0, let S(t) be the time-t price of a stock. You are given: (i)
Question:
For t ≥ 0, let S(t) be the time-t price of a stock. You are given:
(i) S(0) = 15.
(ii) The stock pays dividends continuously at a rate proportional to its price. The dividend yield is 3%.
(iii) The continuously compounded risk-free interest rate is 6%.
(iv) The price of an arithmetic average price 3-year 15-strike European call option is 1.5.
The payoff of the call option is based on the ending stock price every year, i.e.,
Calculate the price of an arithmetic average price 3-year 15-strike European put option.
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Putcall parity for otherwise identical European Asian options asserts tha...View the full answer
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