[Pricing the Variance Contract]. Suppose we have the assumptions of the Black- Scholes Model. Find the pricing formula for the European Style derivative whose payoff is given by function max(ST- K),o]² , where ST is the stock price in the BS model on date T.

Advanced Engineering Mathematics
10th Edition
ISBN:9780470458365
Author:Erwin Kreyszig
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Chapter2: Second-order Linear Odes
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[Pricing the Variance Contract]. Suppose we have the assumptions of the Black-
Scholes Model. Find the pricing formula for the European Style derivative whose payoff is given by function
[max(ST - K),0]² , where ST is the stock price in the BS model on date T.
Transcribed Image Text:[Pricing the Variance Contract]. Suppose we have the assumptions of the Black- Scholes Model. Find the pricing formula for the European Style derivative whose payoff is given by function [max(ST - K),0]² , where ST is the stock price in the BS model on date T.
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