stochastic calculus, Civil Engineering

Assignment Help:
Consider a market with one stock and one money market account, with
the same assumptions on parameters (such as r, µ and s
2
) as in the derivation of the
Black-Scholes formula given in class for European call option. Consider a contingent claim
whose payoff depends on two dates T1 and T2, with T2 > T1 > 0 and two numbers K1 > 0
and K2 > 0. The buyer of this contingent claim has the right to buy 1 share of the stock
at time T1 at price K1. If the price of the stock at time T1 is lower than or equal to K1,
she then has a right to by the stock at price K2 at time T2. (She does not have the buying
opportunity at time T2 if the price of the stock at time T1 is strictly larger than K1.) Find
a formula for the current price (i.e. at time t = 0) of this contingent claim. The formula
has to be explicit in the sense that one could feed into a computer program just like the
Black-Scholes formula. The formula may contain integrals. It is not necessary to simplify
the formula.

Related Discussions:- stochastic calculus

Concrete pavement, Question In case of concrete pavement, why is requir...

Question In case of concrete pavement, why is requirement of 95% by mass of quartz grains are specified in contract? Answer In universal Specification of Civil Enginee

Advantages and dis advantages of timber, WHAT ARE THE ADVANTAGES AND DISADV...

WHAT ARE THE ADVANTAGES AND DISADVANTAGES OF TIMBER FOR CIVIL ENGINEERING

What is unimat machine, Q. What is Unimat Machine? The machine has got ...

Q. What is Unimat Machine? The machine has got 16 independently tiltable tamping tools which enable the machine to work on points and crossing as well as on plain track. The ma

Turbines, How do we get electricity even when the gates of a dam were close...

How do we get electricity even when the gates of a dam were closed?

Determine the limit state of serviceability, Determine the Limit State of S...

Determine the Limit State of Serviceability Cracking Cracking of concrete should not affect the appearance or durability of the structure. The criteria of limit state of cracki

Main concern regarding design of pavements, Question If In case a road ...

Question If In case a road passes from side to side a reclaimed land and an existing land, what is key main concern regarding design of pavements? Answer For a breathin

Physics, about lenses & mirrors for assignment

about lenses & mirrors for assignment

Explain the erosion and sedimentation, Explain the Erosion and Sedimentatio...

Explain the Erosion and Sedimentation Erosion: Removal of soil or other channel material caused by the rapid movement of water over the channel surface. The removed material

Raft foundation, after formation of the soil under raft some area around th...

after formation of the soil under raft some area around the lift pit for example will be on tipping shape and some column placed in the same area the question how we place the col

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd