Question: A barrier COD option is like a COD except that
A barrier COD option is like a COD except that payment for the option occurs whenever a barrier is struck. Price a barrier COD put for the same values as in the previous problem, with a barrier of $95 and a strike of $90. Compute the delta and gamma for the paylater put. Compare the behavior of delta and gamma with that for a COD. Explain the differences, if any.
Relevant QuestionsVerify that equation (23.7) satisfies the appropriate boundary conditions for Pr(ST ≤ H and ST >K). The quanto forward price can be computed using the risk-neutral distribution as E(Yx−1). Use Proposition 20.4 to derive the quanto forward price given by equation (23.30). Suppose S = $100, r = 8%, σ = 30%, T = 1, and δ = 0. Use the Black-Scholes formula to generate call and put prices with the strikes ranging from $40 to $250, with increments of $5. Compute the implied volatility from these ...For the period 1999-2004, using daily data, compute the following: a. An EWMA estimate, with b = 0.95, of IBM's volatility using all data. b. An EWMA estimate, with b = 0.95, of IBM's volatility, at each date using only the ...Verify that the 1-year forward rate 3 years hence in Figure 25.5 is 14.0134%.
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