Use a change of numeraire and measure to verify that the value of a claim paying K

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Use a change of numeraire and measure to verify that the value of a claim paying

K_T if S_T < K is Ke⁻^rT N(−d2). (Note that this is the first term in the Black-Scholes put price. You can mimic the derivation in the text for a cash-or-nothing call.)

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Derivatives Markets

ISBN: 9789332536746

3rd Edition

Authors: Robert McDonald

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Question Posted: Aug 12, 2015 02:54 AM

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Use a change of numeraire and measure to verify that the value of a claim paying K

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Derivatives Markets

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