You are given the following generic Black-Scholes-type pricing function: and all variables are positive. Your boss, who
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You are given the following generic Black-Scholes-type pricing function:
and all variables are positive.
Your boss, who knows nothing about option pricing, has asked you to analyze the following T-year European options. Allergic to formulas, he wants you to simplify notation and express the Black-Scholes pricing formulas of these options in terms of the BS function above: (r is the continuously compounded risk-free interest rate)
(a) Using standard notation in this book, fill in 1 to 8 in the above table.
(b) Explain to your boss the verbal meaning of σ for options B and D.
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a The eight blanks should be filled in as follows b For opt...View the full answer
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