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A stock is priced at $54 and has volatility of 30% per annum. The risk-free rate is 6% per annum compounded continuously. Price a European
A stock is priced at $54 and has volatility of 30% per annum. The risk-free rate is 6% per annum compounded continuously. Price a European derivative that matures in one year and will pay 5 times the decrease in stock price below $62 if the stock price after one year is less than $62 and will pay 4 times the increase in stock price above $62 if the stock price after one year is more than $62.
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