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90 Mathematics for Finance


Exercise 4.8


Apply the Fundamental Theorem of Asset Pricing to find the time 0
and 1 prices of a put option with strike price $110 maturing after two
steps, given the same scenariosω 1 ,ω 2 ,ω 3 ,ω 4 , stock pricesS(0),S(1),S(2)
and money market pricesA(0),A(1),A(2) as in Example 4.5.
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