Question: Using the information in Table 15.5, suppose we have a bond that after 2 years pays one barrel of oil plus max(0, S2

Using the information in Table 15.5, suppose we have a bond that after 2 years pays one barrel of oil plus λ × max(0, S2 − 20.90), where S2 is the year-2 spot price of oil. If the bond is to sell for $20.90 and oil volatility is 15%, what is λ?

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