Assume the Black-Scholes framework. For a 5-month European gap put option on a nondividend-paying stock, you are

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Assume the Black-Scholes framework. For a 5-month European gap put option on a nondividend-paying stock, you are given:

(i) The current price of the stock is 120.

(ii) The stock’s volatility is 20%.

(iii) The gap put option has strike price 110 and payment trigger 130.

(iv) The continuously compounded risk-free interest rate is 4%.

Calculate the current gamma of the gap put option.

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Derivative Pricing

ISBN: 9780367734213

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Authors: Ambrose Lo

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Question Posted: Dec 07, 2023 06:08 AM

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Assume the Black-Scholes framework. For a 5-month European gap put option on a nondividend-paying stock, you are

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Calculating Gamma of the Gap Put Option While the BlackScholes framework itself cannot directly valu...View the full answer

Derivative Pricing

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