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A financial institution plans to offer a security that pays off a dollar amount equal to ST2 at time T. (a) Use risk-neutral valuation to

A financial institution plans to offer a security that pays off a dollar amount equal to ST2 at time T. (a) Use risk-neutral valuation to calculate the price of the security at time t in terms of the stock price, S , at time t . (Hint: The expected value of ST2 can be calculated from the mean and variance of ST given in section (b) Confirm that your price satisfies the differential equation

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