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Consider the model,                                C = N(d1)St − N(d2)Ke−rt, where                               d1 =[ln st/K+ (r +σ2/2) t ] /σ√t and                               d2 = d1 − σ√t.   State the above model and explain the importance of the model in mathematics of finance.

Consider the model,                                C = N(d1)St − N(d2)Ke−rt, where                               d1 =[ln st/K+ (r +σ2/2) t ] /σ√t and                               d2 = d1 − σ√t.   State the above model and explain the importance of the model in mathematics of finance.

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Consider the model,

                               C = N(d1)St − N(d2)Ke−rt,

where

                              d1 =[ln st/K+ (r +σ2/2) t ] /σ√t

and

                              d2 = d1 − σ√t.

 

State the above model and explain the importance of the model in mathematics of finance.

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