Question: What is Pr St 105 for t 1 Howdoes
What is Pr(St > $105) for t = 1? Howdoes this probability change when you changet? How does it change when you change σ?
Answer to relevant QuestionsWhat is E(St |St > $105) for t = 1? How does this expectation change when you change t , σ, and r? An options trader purchases 1000 1-year at-the-money calls on a non-dividend paying stock with S0 = $100, α = 0.20, and σ = 0.25. Assume the options are priced according to the Black-Scholes formula and r = 0.05. a. Use ...The Black-Scholes price for a European put option with S = $40, K = $40, σ = 0.30, r = 0.08, δ = 0, and t = 0.25 is $1.99. Use Monte Carlo to compute this price. Compute the standard deviation of your estimates. How many ...Suppose that the processes for S1 and S2 are given by these two equations: dS1= α1S1dt + σ1S1dZ1 dS2 = α2S2dt + σ2S2dZ2 dQ = αQQdt + Q_ η1dZ1+ η2dZ2 Show that, to avoid arbitrage, Suppose S(0) = $100, r = 0.06, σS = 0.4, and δ = 0. Use equation (20.32) to compute prices for claims that pay the following: a. S2 b.√S c. S−2 Compare your answers to the answers you obtained to Problem 19.6.
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