Question: 16 Consider a Black-Scholes-Merton model with = 0.1 r=0.1, = 1 T=1 years, ( 0 ) = 100 S(0)=100. Suppose the Black-Scholes price of the

16 Consider a Black-Scholes-Merton model with = 0.1 r=0.1, = 1 T=1 years, ( 0 ) = 100 S(0)=100. Suppose the Black-Scholes price of the digital option that pays one dollar if ( ) 100 S(T)100 and zero otherwise, is equal to 0.51823 0.51823. Enter the value of volatility (hint: it is one of the values 0.1 , 0.2 , ... , 0.9 , 1.0 0.1,0.2,...,0.9,1.0)

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