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

Basic considerations governing selection of road alignment, Basic Considera...

Basic Considerations Governing Selection of Road Alignment: The following considerations shall be kept in view in selecting the road alignment: Roads in Plain Areas (a)

Explain dielectric breakdown, Explain Dielectric breakdown Dielectric ...

Explain Dielectric breakdown Dielectric breakdown means failure or deterioration of the dielectric material because of various reasons.

What is bore hole, What is Bore Hole In exploration of  area of  limit...

What is Bore Hole In exploration of  area of  limited extent  the borings should preferably be located near the comers of  the area. A minimum of three holes should be made un

State the term - post-tensioned concrete, State the term - Post-tensioned c...

State the term - Post-tensioned concrete In Post-tensioned concrete construction, as shown in Figure,  tendons are placed inside concrete and stretched after concrete has attai

Process of lubrication of girder bearing, Q. Process of Lubrication of Gird...

Q. Process of Lubrication of Girder Bearing? Oiling and greasing of bearings is done to ensure that the bearings are well lubricated and working freely to permit expansion and

Premix carpet open graded, what is premix carpet open graded and where is i...

what is premix carpet open graded and where is it used and what are its limitations ?

Some compound or metal vanishes under certain conditions is , Some compound...

Some compound or metal vanishes under certain conditions is? Answer: Due to Super conductivity some compound or metal vanishes

Foundation recommendation, what are the necessary data required for foundat...

what are the necessary data required for foundation recommendation other than SPT value ? why can''t we go for SPT value alone?

Surveying, define traverse.purpose of traverse, procedures of traverse, tak...

define traverse.purpose of traverse, procedures of traverse, taking linner measurment, types of traverse, convert the following quardnatal bearing to wcb. 1.OA= N15 deg10mins ''E,

Load transmission, • The transmission of load through a structure can be co...

• The transmission of load through a structure can be complex but in any particular case            - The applied load can usually be classified into 4 types                •

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