Answered step by step
Verified Expert Solution
Question
1 Approved Answer
I only need the solution to part b. If you need more information I will add it. The following exercises use the random stock price
I only need the solution to part b. If you need more information I will add it.
The following exercises use the random stock price Sy = Soerr-92/2)T +0 VIZ This may be substituted for the model in equation (5.16). -o to 1. Suppose that Z denotes a standard normal random variable. (a) Verify that E[e0 VT2] = {0-1/2 for each T >0. Hint: Multiply the density function in the integral (5.3) by eo vix and integrate from 00. Complete the square. (b) Show that E(ST) = et So Part (b) shows that the related stock model earns the continuously compounded riskless rate on the average. The following exercises use the random stock price Sy = Soerr-92/2)T +0 VIZ This may be substituted for the model in equation (5.16). -o to 1. Suppose that Z denotes a standard normal random variable. (a) Verify that E[e0 VT2] = {0-1/2 for each T >0. Hint: Multiply the density function in the integral (5.3) by eo vix and integrate from 00. Complete the square. (b) Show that E(ST) = et So Part (b) shows that the related stock model earns the continuously compounded riskless rate on the averageStep by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started