Check that the solution for the down-and-out call option,VD/O, satisfies BlackScholes, where and C(S, t) is the
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Check that the solution for the down-and-out call option,VD/O, satisfies Black–Scholes, where
and C(S, t) is the value of a vanilla call option with the same maturity and payoff as the barrier option.
Show that S1− 2r/σ2 V(X2/S, t) satisfies Black–Scholes for any X, when V(S, t) satisfies Black–Scholes.
Transcribed Image Text:
S VDjo(S, t) = C(S, t) - C(SG/S, t),
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The downandout call option VDO satisfies BlackScholes if it follows the partial differential equatio...View the full answer
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