Compute the prices of knock-out calls with barrier

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Reference no: EM132066602

Let S= $40, K= $45, alpha=.3, r=.08, delta=0, and T= (.25, .5, 1, 2, 3, 4, 5, 100).

a. Compute the prices of knock-out calls with a barrier of $38.

b. compute the ratio of the knock-out call prices to the prices of standard calls. Explain the pattern you see.

Reference no: EM132066602

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