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Question: Assume that a stock index follows a risk-neutral geometric motion with drift = (r q) 2 /2 where q is the index dividend yield.

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Question: Assume that a stock index follows a risk-neutral geometric motion with drift µ = (r − q) − σ 2 /2 where q is the index dividend yield. Show that the probability that a European call (on this stock index) is exercised, is equal to Φd 2. m,

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