Find the black-scholes price of this call option

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One share of Stock A is used as the underlying asset on an exchange option, for which the benchmark asset is four shares of a Stock B. Currently, Stock A trades for $42 per share, and Stock B trades for $10 per share. Stock A has an annual price volatility of 0.3 and pays no dividends. Stock B has an annual price volatility of 0.5 and pays dividends at an annual continuously compounded yield of 0.04. The correlation between the continuously compounded returns on the two assets is 0.4. The exchange option expires in 1 year. Find the Black-Scholes price of this call option.

Reference no: EM131896761

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