Question: Question about B-S model and option 2. Consider the stock price under the Black-Scholes assumption, i.e. 1 St : So exp ((r 502) t +

Question about B-S model and option

2. Consider the stock price under the Black-Scholes assumption, i.e. 1 St : So exp ((r 502) t + aWt) where 7' denotes the interest rate. Consider an option with payoff h (ST) = ST (log %) where T is the time of maturity and K is a constant. Decide whether V (t, 21:) : :1: [log (g) + (1" + $02) (T a] is the Black-Scholes price of the option at time t assuming that St = :12. Present your arguments. Compute the Greeks of this Option. 50%

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