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A financial institution plans to offer a security that pays off a dollar amount equal to lnSt at time T. 1) Use risk-neutral valuation to
A financial institution plans to offer a security that pays off a dollar amount equal to lnSt at time T.
1) Use risk-neutral valuation to calculate the price of security at time t in terms of the stock price, St, at time t.
2) Confirm that your price satisfies the differential equation.
I tried to send a differential equation related to q2, but the image file was not uploaded, so I just sent it. U don't have to answer if you can't solve the problem without it. THANK YOU.
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