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Problem Assume that a non-dividend-paying stock has an expected return of and a volatility of o. A financial institution
Posted: Sun Jun 05, 2022 7:10 am
by answerhappygod
- Problem Assume That A Non Dividend Paying Stock Has An Expected Return Of And A Volatility Of O A Financial Institution 1 (49 KiB) Viewed 64 times
Problem Assume that a non-dividend-paying stock has an expected return of and a volatility of o. A financial institution plans to offer a derivative that pays off a dollar amount equal to Sat time T where S is the stock price at time T. Assume no dividends. Defining other variables as necessary use risk-neutral valuation to calculate the price of the derivative at time zero. (Hint: E[(S)²] = var(S₁) +[E(S₂)]²)