2 Suppose a stock price is lognormal with volatility Consider a derivative with maturity T and payoff f(87) sr, what is its value at time 0 (Hint your task is to evaluate e rERNs Recall that under the risk neutral probability distribution, sT is lognormal, and therefore s is also lognormal Use the fact that if Z is Gaussian with mean m and standard deviation s then Eez em 82 ) 2 Suppose a stock price is lognormal with volatility Consider a derivative with maturity T and payoff f(87) sr, what is its value at time 0 (Hint your task is to evaluate e rERNs Recall that under the risk neutral probability distribution, sT is lognormal, and therefore s is also lognormal Use the fact that if Z is Gaussian with mean m and standard deviation s then Eez em 82 )

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2  Suppose a stock price is lognormal with volatility   Consider a derivative with maturity T and payoff f(87)   sr, what is its value at time 0  (Hint  your task is to evaluate e rERNs Recall that under the risk neutral probability distribution, sT is lognormal, and therefore s is also lognormal  Use the fact that if Z is Gaussian with mean m and standard deviation s then Eez    em 82  ) 2  Suppose a stock price is lognormal with volatility   Consider a derivative with maturity T and payoff f(87)   sr, what is its value at time 0  (Hint  your task is to evaluate e rERNs Recall that under the risk neutral probability distribution, sT is lognormal, and therefore s is also lognormal  Use the fact that if Z is Gaussian with mean m and standard deviation s then Eez    em 82  )

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2. Suppose a stock price is lognormal with volatility . Consider a derivative with maturity T and payoff f(87) = sr, what is its value

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