Question: Question #6 (10 marks) Q6-Part I (6 marks) (1) Can the Black-Scholes pricing model be used to price the American call option on a non-dividend-paying

Question #6 (10 marks) Q6-Part I (6 marks) (1) Can the Black-Scholes pricing model be used to price the American call option on a non-dividend-paying stock? If yes, explain. If not, what model would be used? (3 marks) (2) Can the Black-Scholes pricing model be used to price the American put option on a non-dividend-paying stock? If yes, explain. If not, what model would be used? (3 marks) Q6-Part II (4 marks) Risk neutral valuation is very important in derivatives pricing. Apply risk-neutral valuation to derive the value of a long forward contract on a non-dividend-paying stock. (4 marks) Question #6 (10 marks) Q6-Part I (6 marks) (1) Can the Black-Scholes pricing model be used to price the American call option on a non-dividend-paying stock? If yes, explain. If not, what model would be used? (3 marks) (2) Can the Black-Scholes pricing model be used to price the American put option on a non-dividend-paying stock? If yes, explain. If not, what model would be used? (3 marks) Q6-Part II (4 marks) Risk neutral valuation is very important in derivatives pricing. Apply risk-neutral valuation to derive the value of a long forward contract on a non-dividend-paying stock. (4 marks)

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