Under the same assumptions as the previous problem show that
Under the same assumptions as the previous problem show that
Under the same assumptions as the previous problem, show that the value of a claim paying S2(T ) if S1(T) > KS2(T ) is
where σ2, δ1, and δ2 are defined as in the previous problem.
In the next set of problems you will use Monte Carlo valuation. Assume that S0 = $41,
K = $40, P0 = 0.9802, σ = 0.30, T = 0.25, and δ = 0.