Question: Consider an option which pays a certain amount if the price of the stock at a certain date falls within a specified interval. Otherwise, nothing

Consider an option which pays a certain amount if the price

Consider an option which pays a certain amount if the price of the stock at a certain date falls within a specified interval. Otherwise, nothing will be paid out. Suppose that the option pays K to the holder at date 7 if the stock price at time 7 is in the interval [a,]. Determine the arbitrage- free price, in terms of the standard normal cumulative distribution function N. You should use the stock price expression in p. 165 of the lecture slides. Consider an option which pays a certain amount if the price of the stock at a certain date falls within a specified interval. Otherwise, nothing will be paid out. Suppose that the option pays K to the holder at date 7 if the stock price at time 7 is in the interval [a,]. Determine the arbitrage- free price, in terms of the standard normal cumulative distribution function N. You should use the stock price expression in p. 165 of the lecture slides

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