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A stocks current price S is $100. Its return has a volatility of s = 25 percent per year. European call and put options trading
A stocks current price S is $100. Its return has a volatility of s = 25 percent per year. European call and put options trading on the stock have a strike price of K = $105 and mature after T = 0.5 years. The continuously compounded risk-free interest rate r is 5 percent per year. The Black-Scholes-Merton model gives the price of the European put as:
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