Consider a structured security of the following type: The purchaser invests $1,000 and in three years gets
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Consider a structured security of the following type: The purchaser invests $1,000 and in three years gets back the initial investment plus 95% of the increase in a market index whose current price is 100. The interest rate is 6% per year, continuously compounded. Assuming the security is fairly priced, what is the implied volatility of the market index?
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The implied volatility of the market index is the standard deviation of ...View the full answer
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