Question: B 2. Ans fast (30 points) The payoff function of a contract at maturity T is given below, C(S,, T) = In , S, >

B 2.

Ans fast

(30 points) The payoff function of a contract at maturity T is given below, C(S,, T) = In , S, > K K 0, S,SK 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 partial differential equation approach. You need to show clear derivation steps

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