Assume the Black-Scholes framework. You are given: (i) The stock price is 100. (ii) The stock pays
Question:
Assume the Black-Scholes framework. You are given:
(i) The stock price is 100.
(ii) The stock pays dividends continuously at a rate proportional to its price. The dividend yield is 2%.
(iii) The continuously compounded risk-free interest rate is 6%.
(iv) The stock’s volatility is 40%.
Calculate the gamma of a 1-year 105-strike European call option.
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