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Exercise 4 - Spread Option - 10 x 2 points We will add another stock to the mix with the following characteristics: X, =90 o=
Exercise 4 - Spread Option - 10 x 2 points We will add another stock to the mix with the following characteristics: X, =90 o= 30% Assume the correlation p = 50% We want to value a spread option whose payoff is max (St X1 Kspreaa. 0) with Kproqq = 8 1. Using a Monte Carlo method of your choice, what is the price, delta, gamma and theta of this derivative? 2. Plot how the price changes with different values of the correlation? Any intuitive explanation
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