Explain with reasons as to what happens to the following: a. A look back call as we
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Question:
Explain with reasons as to what happens to the following:
a. A look back call as we increase the frequency with which we observe the asset price in calculating the minimum
b. A down and out call as we increase the frequency with which we observe the asset price in determining whether the barrier has been crossed
c. The price of an ``out'' barrier option when the volatility is increased
d. The price of an American digital option when volatility is increased
e. The relative prices of out - of - the - money American and European digital calls for an asset that follows the Brownian motion and there are no interest rates.
f. The price of a derivative if it has a negative vega and the volatility increases
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