Calculate the price of a one-year European option to give up 100 ounces of silver in exchange
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Calculate the price of a one-year European option to give up 100 ounces of silver in exchange for one ounce of gold. The current prices of gold and silver are $1520 and $16, respectively; the risk-free interest rate is 10% per annum; the volatility of each commodity price is 20%; and the correlation between the two prices is 0.7. Ignore storage costs.
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