Mathematics
Mathematics, 30.11.2019 05:31, mzbugsbunny3029

Consider a derivative whose payoff at expiration is s 2 t + 1 if st < 100 and s 2 t + st − 100 if st ≥ 100. assuming the volatility is σ, the riskfree rate r, and the spot price s0, compute the price of this derivative today. hint: write the derivative as 3 derivatives (a power option, an option and a digital option) and price each separately.

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Consider a derivative whose payoff at expiration is s 2 t + 1 if st < 100 and s 2 t + st − 100 i...

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