Assume the Black-Scholes framework. You are given: (i) The stock, whose current price is 100, pays dividends

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Assume the Black-Scholes framework. You are given:

(i) The stock, whose current price is 100, pays dividends continuously at a rate proportional to its price.

(ii) The stock’s volatility is 0.35.

(iii) The continuously compounded expected rate of stock-price appreciation is 15%.

(iv) The continuously compounded risk-free interest rate is 12%.

Construct a 95% lognormal prediction interval for the price of the stock in 3 months.

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Derivative Pricing

ISBN: 9780367734213

1st Edition

Authors: Ambrose Lo

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Question Posted: Nov 22, 2023 08:18 AM

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Assume the Black-Scholes framework. You are given: (i) The stock, whose current price is 100, pays dividends

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As N 1 0975 195996 a 95 lognormal predict...View the full answer

Derivative Pricing

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