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Let 0 < K < K. Assume that the underlying stock price S, follows the Black-Scholes model, with drift , volatility and So initial

Let 0 < K < K. Assume that the underlying stock price S, follows the Black-Scholes model, with drift ,

Let 0 < K < K. Assume that the underlying stock price S, follows the Black-Scholes model, with drift , volatility and So initial price. Let the risk free rate be equal to r. Consider an option having payoff at maturity T Cr=min(max(Sr. K), K). i) Express the option as a portfolio of European Call, Put and stock. ii) Compute the initial price of this option.

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It seems like there may be a typo in your question as you mentioned 0 K K which doesnt make sense Ill assume you meant that 0 K S0 where S0 is the ini... blur-text-image

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