Calculate the probability that a european call option

Reference no: EM13178399

Let X(t) be a Brownian motion. The stock price of an asset S(t) follows the lognormal random walk S(t)=40e^(.35X(t)+.01t) Calculate the expected value of S(t) after 4 months (1/3 years) and calculate the probability that a European call option with exercise price E=50 will be exercised at expiration time T=8 months.

Reference no: EM13178399

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