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Consider a European put option with expiration time T and strike price K. Let the underlying stocks price process is governed by a geometric Brownian
Consider a European put option with expiration time T and strike price K. Let the underlying stocks price process is governed by a geometric Brownian motion with mean rate of return and volatility . Let r denote the continuously compounding risk-free interest rate. Derive the explicit finite difference scheme for the Black-Scholes-Merton PDE along with terminal and boundary conditions governing the option price V (t, S(t)).
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