Repeat the previous problem assuming that 1= 0.05 and 2 = 0.12. Verify that both procedures give

Question:

Repeat the previous problem assuming that δ1= 0.05 and δ2 = 0.12. Verify that both procedures give a price of approximately $15.850.
Previous problem Suppose that S1 and S2 are correlated, non-dividend-paying assets that follow geometric Brownian motion. Specifically, let S1(0) = S2(0) = $100, r = 0.06, σ1 = 0.35, σ2 = 0.25, ρ = 0.40 and T = 1. Verify that the following two procedures for valuing an outperformance option give a price of approximately $13.464.