Consider a financial derivative on a stock that expires in 6 months. The derivative's payoff is...
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Consider a financial derivative on a stock that expires in 6 months. The derivative's payoff is $100 if the stock price is between $100 and $120 at the expir ation date and $0 otherwise. Assuming that the stock price follows the log-normal distribution, what is the no-arbitrage present price of the derivative base d on the Black-Scholes-Merton model? The market information is as follows: current stock price: $94, risk-free interest rate: 5%, volatility: 20%. (in dollar s without the dollar sign, use two decimal places). Consider a financial derivative on a stock that expires in 6 months. The derivative's payoff is $100 if the stock price is between $100 and $120 at the expir ation date and $0 otherwise. Assuming that the stock price follows the log-normal distribution, what is the no-arbitrage present price of the derivative base d on the Black-Scholes-Merton model? The market information is as follows: current stock price: $94, risk-free interest rate: 5%, volatility: 20%. (in dollar s without the dollar sign, use two decimal places).
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The BlackScholesMerton BSM model is a widely used method for pricing options It is a relatively comp... View the full answer
Related Book For
Intermediate Financial Management
ISBN: 978-1111530266
11th edition
Authors: Eugene F. Brigham, Phillip R. Daves
Posted Date:
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