The price of a share is ($ 100). During the following six months the price can go

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The price of a share is $\$ 100$. During the following six months the price can go up or down in a $10 \%$ per month. If the risk-free interest rate is $8 \%$ per year, continuously compounded,

(a) what is the value of a European Call option expiring in one year with strike price $\$ 100$ ?

(b) compare with the result obtained when the risk-free interest rate is monthly compounded.

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Quantitative Finance

ISBN: 9781118629956

1st Edition

Authors: Maria Cristina Mariani, Ionut Florescu

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Question Posted: Apr 20, 2024 05:57 AM

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The price of a share is ($ 100). During the following six months the price can go

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Quantitative Finance

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