Assume the Black-Scholes framework. You are given: (i) The current stock price is 95. (ii) The stocks

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Assume the Black-Scholes framework. You are given:

(i) The current stock price is 95.

(ii) The stock’s volatility is 10%.

(iii) The stock pays dividends continuously at a rate proportional to its price. The dividend yield is 10%.

(iv) The continuously compounded risk-free interest rate is 5%.

Calculate the price of a 6-month 100-strike European gap call option with a payment trigger of 110.

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Derivative Pricing

ISBN: 9780367734213

1st Edition

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 95. (ii) The stocks

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With K d d 100 K2 110 In95110 005...View the full answer

Derivative Pricing

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