Question: 2. (26 points) The payoff function of a contract at maturity T is given below, C(S,T) = S, S > K (0, ST K

2. (26 points) The payoff function of a contract at maturity T

2. (26 points) The payoff function of a contract at maturity T is given below, C(S,T) = S, S > K (0, ST K where K is the strike price and S is the current price of a risky stock. The stock does not pay dividends. K is a constant parameter. In the Black-Scholes framework, price this contract by martingale approach. You need to show clear derivation steps.

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