Calculate the value of your selected barrier option

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Determine the prices of the following barrier options.

a. A down-and-out call with the barrier at 90 and the exercise price at 95

b. An up-and-out put with the barrier at 110 and the exercise price at 105

c. Select any other barrier option but base your selection on the following instructions:

Calculate the value of your selected barrier option and use it with the results you obtained in part a or b to determine the price of a standard European call or put. Then calculate the actual value of the European call or put and compare that answer with your answer obtained from the barrier options. Explain why this result is obtained.

Reference no: EM131323274

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