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

Necessity for road drainage - road drainage, Necessity for Road Drainage: ...

Necessity for Road Drainage: Poor drainage can cause damage to the various components of a road in the following manner: (a) Water can enter the various pavement layers th

Properties of ordinary portland cement, Properties of Ordinary Portland Cem...

Properties of Ordinary Portland Cement (i) Chemical properties: Portland cement consists chemical compounds are following: (a) Tricalcium silicate          3 CaO.SiO 2 (C

Landing systems, Landing Systems: There are two basic types of landin...

Landing Systems: There are two basic types of landing, viz : (a) visual landing, when the weather conditions are favourable, and (b) instrumented landing, when the weat

Define categories of spalls -underwater inspection of bridge, Define catego...

Define categories of Spalls -underwater inspection of bridge? Spalls are classified as follows:  i. Small spalls - up to 25 mm deep or approximately 150 mm in diameter. i

Define seismic isolation bearings - bridge bearing, Define Seismic Isolati...

Define Seismic Isolation Bearings  - Bridge Bearing? Many bridges had been built before the proper seismic design specifications were known to us. These bridges require strengt

State different types of chlorination processes, Q. State different types o...

Q. State different types of chlorination processes available in Railway & market for disinfect ion of water. What type of chlorine used in the above different process. What do you

Determine the in-situ dry unit weight, Q. The following observations were r...

Q. The following observations were recorded in a Field density determination by sand-replacement method: Volume of Calibrating can = 1000 cm3 Weight of empty can = 10 N We

Strength of rivet joints, Ask question #Minimum 100 Please help me to...

Ask question #Minimum 100 Please help me to write a c program to determine strength and efficiency of single cover butt joint, lap joint, double cover butt joint . words ac

Survey, who to we calculate the RL at first point.

who to we calculate the RL at first point.

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