Question
Consider a Black-Scholes-Merton model with r=0.1, T=1 years, S(0)=100. Suppose the Black-Scholes price of the digital option that pays one dollar if S(T)100 and zero
Consider a Black-Scholes-Merton model with r=0.1, T=1 years, S(0)=100. Suppose the Black-Scholes price of the digital option that pays one dollar if S(T)100 and zero otherwise, is equal to 0.518230.51823.
a. Enter the value of volatility (hint: it is one of the values 0.1, 0.2, ... 0.9, 1.0): b. Enter the risk-neutral probability that the option will be in the money:
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ISE Financial Institutions Management A Risk Management Approach
Authors: Anthony Saunders Professor, Marcia Millon Cornett, Otgo Erhemjamts
10th International Edition
1260571475, 9781260571479
