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1. In a risk neutral world, the stock price is modeled a St=S0e(r212)t+tZ, where Z is distributed as N (a) Show that the probability that

image text in transcribed 1. In a risk neutral world, the stock price is modeled a St=S0e(r212)t+tZ, where Z is distributed as N (a) Show that the probability that a European cal option with strike price K will be exercised is (b) What is the expression for the value of 3 detive N(d2). tive that pays P100 if the price of the stocis time T is greater than K

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