Question
Suppose S0 = 100. Moreover, you know that the price at time 0 of a power option (payoff ST2 ) expir- ing in 1 year
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Suppose S0 = 100. Moreover, you know that the price at time 0 of a power option (payoff ST2 ) expir- ing in 1 year is $12,000 and the price at time 0 of a power option expiring in 2 years is $14,600. What is the expected return and volatility of the stock under the assumption that the price was calculated using the risk-neutral approach in the Black-Scholes-Merton model?
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Project Finance
Authors: B Rajesh Kumar
1st Edition
3030967247, 978-3030967246
