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Unformatted text preview: 10 40 2.27 21.82 30 rier at every time step. Q47 Page 3 S_0 = 60 r = 0.06 Sigma = 0.4 T = dt = 0.167 u = 1.177 p = 0.49 Yvalues Floating strike lookback put 1.6321 1.3862 1.3862 1.1774 1.1774 1.1774 1.0000 1.0000 1.0000 1.0000 Wvalues Optimal returns but in units o 0.6321 0.3862 0.3862 0.2092 0.1774 0.1774 0.1580 0.1196 0.0761 0.0000 The option price is 0.158*S(0) = 9.48 We see that it is always optimal to wait so the European option has the same price as the American in Q47 Page 4 0.5 t pays S*  S(T) = S(T)(Y(T) 1). of the stock price. in this example....
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This note was uploaded on 02/04/2011 for the course MATH 3301 taught by Professor Dri.m.macphee during the Spring '10 term at Durham.
 Spring '10
 DrI.M.MacPhee
 Math

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