stochastic calculus, Civil Engineering

Assignment Help:
Consider a market with one stock and one money market account, with
the same assumptions on parameters (such as r, µ and s
2
) as in the derivation of the
Black-Scholes formula given in class for European call option. Consider a contingent claim
whose payoff depends on two dates T1 and T2, with T2 > T1 > 0 and two numbers K1 > 0
and K2 > 0. The buyer of this contingent claim has the right to buy 1 share of the stock
at time T1 at price K1. If the price of the stock at time T1 is lower than or equal to K1,
she then has a right to by the stock at price K2 at time T2. (She does not have the buying
opportunity at time T2 if the price of the stock at time T1 is strictly larger than K1.) Find
a formula for the current price (i.e. at time t = 0) of this contingent claim. The formula
has to be explicit in the sense that one could feed into a computer program just like the
Black-Scholes formula. The formula may contain integrals. It is not necessary to simplify
the formula.

Related Discussions:- stochastic calculus

Surveying, Describe the two fundamental purpose of surveying.

Describe the two fundamental purpose of surveying.

Self compacting concrete, what will be the w/c ration and cement/fly ash ra...

what will be the w/c ration and cement/fly ash ration for the particular mix design

Define the term - cracking load and proof stress, Define the term - Crackin...

Define the term - Cracking Load and Proof Stress Cracking Load The load on the structural member at the time of the initiation of first visible crack in concrete is know

What is switch and expansion joint, Q. What is Switch and Expansion Joint? ...

Q. What is Switch and Expansion Joint? Switch Expansion, Joint (SEJ) is an expansion joint installed at each end of LWR/CWR to permit expansion/contraction of the adjoining bre

Basic keywords related to road materials, Basic Keywords related to road ma...

Basic Keywords related to road materials: Sub-grade     :            The portion of road embankment immediately below the pavement. Soil Classifications :            A sy

Calculate surface loading rate for each clarifier, A wastewater plant is op...

A wastewater plant is operating at 10MGD with a suspended solids concentration of 200mg/L. It has 6 clarifiers operating in parallel. Each clarifier is 40 foot in diameter and 10 f

Max. moment at cantilever, max. moment at cantilever in up or down of suppo...

max. moment at cantilever in up or down of support or free of end

Determine the cubic yard in the ground, An earthwork contractor encountered...

An earthwork contractor encountered a location within the borrow area where the geological conditions changed.  Instead of encountering 100 cubic yards of wet clay, the contractor

Dynamic force transfer test of shock transmission unit, Define Dynamic Forc...

Define Dynamic Force Transfer Test of Shock Transmission Unit? This test mainly prove the lock up capability of the device. The STU shall be loaded in tension from zero to the

Explain stopping sight distance on horizontal curve, Explain Stopping Sight...

Explain Stopping Sight Distance on Horizontal Curve Section Obstructions along the inside of curves can limit the available (chord) sight distance. A curve must be designed tha

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd