What is the value of this derivative

Reference no: EM132178129

Question - A stock price is currently $25. The interest rate is 6% (with continuous compounding). Volatility is 12% per annum. In 12 months time, an exotic derivative pays off 1/S₁, where S₁ is the stock price after 12 months. What is the value of this derivative? Use a two step binomial tree to value it.

Reference no: EM132178129

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