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AssumedS t = S t dt+ S t dWt, where R , > 0 Let r be the constant interest rate. Suppose r = 1,0

AssumedS_t= S_tdt+ S_tdWt, where R , > 0

Let r be the constant interest rate.

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Suppose r = 1,0 = 2, So = 1. The payoff of a European contract at the terminal time T = 1 is given by if Sr e3. (a) Express Vy as a linear combination of payoffs of some options. (b) Find the price of the contract at time 0. You may leave the CDF N(.) of standard normal in your

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