Hand writing 3 days Thanks!

User Generated

Neguhelnat

Business Finance

Description


Unformatted Attachment Preview

1. (15 pts.) Find E[Bt, Bt,] for tı < t2 if Bt is a SBM. 2. (15 pts.) If X~ N(4,02), find the variance of Y = ex. Hint: use the mgf of X 3. (20 pts.) Let {Xt, t > 0} be BM(0,0). Show that Y= _0xe-(40+ x102)t is a martingale for any constant 8. 4. (30 pts.) Suppose the price St of an asset follows a GBM(0,2). The current price of the asset is $30. The investor plans to sell the asset when it reaches $40 or falls to $25. What is a) the probability of a loss? b) the expected profit per share? c) the expected time to sell? 5. (20 pts.) A stock price follows a geometric Brownian motion with expected return lley = 16% and volatility o = 35%. Current price is $38. Consider an European option with exercise price of $40 and expiration in six months. What is the probability that the option will be exercised if it is a) a call option? b) a put option?
User generated content is uploaded by users for the purposes of learning and should be used following Studypool's honor code & terms of service.

This question has not been answered.

Create a free account to get help with this and any other question!

Related Tags