Sep 21, 2017 term paper 2

CONSIDER THE STOCK PRICE MODEL IN EXAMPLE 13.5. THE T-CONTRACT X TO BE PRICED IS DEFINED BY WHERE…

This paper concentrates on the primary theme of CONSIDER THE STOCK PRICE MODEL IN EXAMPLE 13.5. THE T-CONTRACT X TO BE PRICED IS DEFINED BY WHERE… in which you have to explain and evaluate its intricate aspects in detail. In addition to this, this paper has been reviewed and purchased by most of the students hence; it has been rated 4.8 points on the scale of 5 points. Besides, the price of this paper starts from £ 40. For more details and full access to the paper, please refer to the site.

Consider the stock price model in Example 13.5. The T-contract X to be priced is defined by

 

where a and b are given positive numbers. Thus, up to the scaling factors a and b, we obtain the maximum of the two stock prices at time T. Use Proposition 13.4 and the Black-Scholes formula in order to derive a pricing formula for this contract. See Johnson (1987).

Proposition 13.4

Assume that the contract function  is homogeneous of degree 1, and that the volatility matrix a is constant. Then the pricing function F is given by


0% Plagiarism Guaranteed & Custom Written, Tailored to your instructions


International House, 12 Constance Street, London, United Kingdom,
E16 2DQ

UK Registered Company # 11483120


100% Pass Guarantee

Order Now

STILL NOT CONVINCED?

We've produced some samples of what you can expect from our Academic Writing Service - these are created by our writers to show you the kind of high-quality work you'll receive. Take a look for yourself!

View Our Samples

corona virus stop
FLAT 25% OFF ON EVERY ORDER.Use "FLAT25" as your promo code during checkout