Show that the second derivative with respect to strike of the call payoff f(ST ,K) = (ST

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Show that the second derivative with respect to strike of the call payoff f(ST ,K) = (ST − K, 0)+, at expiry T is given by:

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where δ(ST −K) denotes the Dirac delta function, satisfying the property;

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for a function f of a real variable x. Use this property to show that, for the undiscounted call price

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The Value Of Uncertainty Dealing With Risk In The Equity Derivatives Market

ISBN: 9781848167728,9781908979582

1st Edition

Authors: George Kaye

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Question Posted: Sep 19, 2024 11:02 PM

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Show that the second derivative with respect to strike of the call payoff f(ST ,K) = (ST

Question:

2 f OK2 = 8(ST-K)

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The Value Of Uncertainty Dealing With Risk In The Equity Derivatives Market

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