Let S = $40, = 0.30, r = 0.08, T = 1, and = 0.
Question:
a. Vary δ from 0 to 0.1. What happens to the price of the call?
b. Vary δQ from 0 to 0.1. What happens to the price of the call?
c. Vary ρ from −0.5 to 0.5. What happens to the price of the call?
d. Explain your answers by drawing analogies to the effects of changing inputs in the Black Scholes call pricing formula.
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