Which parameters can be replaced by the appropriate average

Assignment Help Engineering Mathematics

Reference no: EM131168945

Suppose a stock follows a process in the risk-neutral world which involves time-dependent parameters. For the pricing of a call option, which parameters can be replaced by the appropriate average without changing the price of the option?

Reference no: EM131168945

Questions Cloud

What process for fra is equivalent to the log-normal process : What process for the FRAs is equivalent to the log-normal process for forward rates? Suppose we make the FRAs log-normal, what process do we get for the rates?

What is the market price and market output of smoodie in : When Yeon's income was $2,200, he bought 5 kgs of rice a month. Now his income is $3,300 and he buys 4.75 kgs of rice a month.Calculate Yeon's income elasticity of demand forrice. Show your calculation. What is the market price and market output of s..

How would you price the derivative using bgm : How would you price this derivative using BGM? How many evolution times would be needed? Could you price it without using BGM?

Draw a profit volume graph for hawkesbury company : Draw a profit-volume graph for Hawkesbury Company - Prepare income statements for 20x4 using (a) absorption costing and (b) variable costing.

Which parameters can be replaced by the appropriate average : For the pricing of a call option, which parameters can be replaced by the appropriate average without changing the price of the option?

What if the jumps are not log-normal : If the option has N look-at dates, how many (pseudo-)random numbers will be needed per path? What if the jumps are not log-normal?

Determine the range of medication costs at this pharmacy : A pharmacy claims that the average medication costs $32 but it could differ as much as $8. Write and solve an absolute value inequality to determine the range of medication costs at this pharmacy

Show that there is a unique arbitrage-free price for f : An option pays f (St2/St1) for some reasonable function f. Show that there is a unique arbitrage-free price for f and write down an expression for it.

How would you use monte carlo to estimate the density : Show that if spot and volatility are uncorrelated then the risk-neutral density of spot can be written as an integral over log-normal densities. How would you use Monte Carlo to estimate this density?

User Account

All Pages