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A company is currently awaiting the outcome of a major lawsuit. This is expected to be known within one month. The stock price is currently $20. If the outcome is positive, the stock price is expected to be S24 at the end of one month. If the outcome is negative, it is expected to be $18 at this time. The one-month risk-free interest rate is 8% per annum.
a. What is the risk-neutral probability of a positive outcome?
b. What are the values of one-month call options with strike prices of SI9, $20, $21, $22, and $23?
c. Use DerivaGem to calculate a volatility smile for one-month call options.
d. Verify that the same volatility smile is obtained for one-month put options.
The PI is at station 250+50, the design speed is 65mi/h, and a maximum superelevation of 0.07 ft/ft is to be used. If the central angle of the curve is 38 degrees, design a curve for the highway by computing the radius and stationing of PC and PT.
An oil spill has caused the pollution of the groundwater in a small region beneath an industrial site. How long would it take the polluted water from that location to reach a drinking water well located 100 m down gradient? Assume no retardation ..
A train of total mass equal to 500 Megagrams starts from rest and accelerates uniformly to a speed of 90 km/h in 50 s. After reaching this speed, the train travels with a constant velocity.
Find the location and magnitude of the resultant force using the numerical integration and the midpoint rule for the following loading of a plate bounded by x=0-2ft, y=0-2ft and z=0 ft. P(x)=16-x^2-2y^2 (lb/ft^2)
Determine the preconstruction and post construction vertical stress imposed on the soil at a point 2 m below the center of the foundation area (assume westergaard conditions applied)
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Brine flood in a 1.9-in-long and 1.5-in-diameter core plug from the North Sea resulted in a stabilized pressure drop of 46.05 psi. The flood was carried out at 0.05 mL/min with brine viscosity of 0.443 cP. Determine the absolute permeability of this ..
A 1: 1½ : 3 mix (by mass) has a water/cement ratio of 0.4 and a cement content of (400) kg/m3. The temperatures of the ingredients are as follows
What is the actual horizontal distance between the two points? (Assume normal tension is used.)
In a football game, a receiver is standing still, having just caught a pass. Before he can move, a tackler, running at a velocity of +3.1 m/s, grabs him. The tackler holds onto the receiver, and the two move off together with a velocity of +1.6 m/s
A large pond drains down an asphalt rectangular channel that is 2 ft wide. The channel slope is 0.8 degrees. If the flow is uniform, at a depth of 21 in,
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