III. Black-Scholes model-theoretical part (2 questions, 15 points each) 1. Which of the following is a martingale: a discount bond, a stock, or an option, and why/ why not? Why is martingale important if most financial assets are not martingales? Show if the following processes are martingales or not? What transformation could be done to convert them into martingales? - X1=S12 is a process with uncorrelated increments during small intervals with initial point S0=0, or SlN(0,2). ins: Feel free to tell your own story but be concise