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The underlying asset price follows a Black-Scholes model with initial price S0 = 10 euro, volatility = 20% per year, risk free rate r =
The underlying asset price follows a Black-Scholes model with initial price S0 = 10 euro, volatility = 20% per year, risk free rate r = 2% per year. You sell an option that pays 100 if S2 1 100 and 0 otherwise. (Note that T = 1 year). Show how to render -neutral your position.
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