Assume the Black-Scholes framework. You are given: (i) The current stock price is 40. (ii) The stock

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Assume the Black-Scholes framework. You are given:

(i) The current stock price is 40.

(ii) The stock pays no dividends.

(iii) The stock’s volatility is 30%.

(iv) The continuously compounded risk-free interest rate is 8%.

(v) The price of a 3-month 40-strike down-and-in European call option with a barrier of 35 is 0.08.

Calculate the price of a 3-month 40-strike down-and-out European call option with a barrier of 35.

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Derivative Pricing

ISBN: 9780367734213

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Authors: Ambrose Lo

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Question Posted: Dec 07, 2023 06:08 AM

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Assume the Black-Scholes framework. You are given: (i) The current stock price is 40. (ii) The stock

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Derivative Pricing

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