Let S = $40, K = $45, = 0.30, r = 0.08, = 0, and
Question:
a. Compute the prices of knock-out calls with a barrier of $38.
b. Compute the ratio of the knock-out call prices to the prices of standard calls.
Explain the pattern you see.
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a b Table Two for the prices and ratio The longer the time ...View the full answer
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