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5. Consider the Black-Scholes model in which the stock price satisfies So = 1, dSt=Sedt+SdB, and the savings account is given by Beet. The
5. Consider the Black-Scholes model in which the stock price satisfies So = 1, dSt=Sedt+SdB, and the savings account is given by Beet. The digital option with strike K = 1 and expiration time T = 1 pays $1 at time 1 if S > 1, and nothing otherwise. (a) Find the price of this option at time t < 1. (b) Give the delta hedge for this option.
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Principles Of Managerial Finance
Authors: Lawrence J. Gitman, Chad J. Zutter
13th Edition
9780132738729, 136119468, 132738724, 978-0136119463
