1.24. A financial institution plans to offer a derivative that pays off a dollar amount equal to...
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1.24. A financial institution plans to offer a derivative that pays off a dollar amount equal to Sat time T where Sr is the stock price at time T. Assume no dividends. Defining other variables as necessary use risk-neutral valuation to calculate the price of the derivative at time zero. (Hint: The expected value of $ can be calculated from the mean and variance of ST given in Section 11.1.)
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