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Question 2 (20 marks] Assume the risk-free asset B and the (non-dividend paying) stock S follow the dynamics of the Black & Scholes model (with

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Question 2 (20 marks] Assume the risk-free asset B and the (non-dividend paying) stock S follow the dynamics of the Black & Scholes model (with interest rate r, stock drift p and volatility o). (a) Find the price at time 0 of a European option that pays (S-K)+ at maturity T. (b) Find the price at time 0 of a European option that pays (S4 - STK)+ at maturity T. (c) Find the price at time 0 of a European option that pays S 15k at maturity T. Question 2 (20 marks] Assume the risk-free asset B and the (non-dividend paying) stock S follow the dynamics of the Black & Scholes model (with interest rate r, stock drift p and volatility o). (a) Find the price at time 0 of a European option that pays (S-K)+ at maturity T. (b) Find the price at time 0 of a European option that pays (S4 - STK)+ at maturity T. (c) Find the price at time 0 of a European option that pays S 15k at maturity T

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