Assume the following: LN(S)and LN(Q)have a correlation coefficient of -0.65,S(0)= 55,Q(0)= 60,r = 0.04,σs = 0.22 σQ = 0.15,and dividends = 0.Using formula 20.39,what is the price of a claim that pays Q/ $\sqrt{S}$ ?

Question

Quizplus · Accepted Answer

The price of the claim can be calculated using the formula for the price of a claim that pays $ \frac{Q}{\sqrt{S}} $. Given the correlation, interest rate, and volatilities, the correct calculation leads to a price of $8.16.

Assume the Following: LN(S)and LN(Q)have a Correlation Coefficient of -0 S\sqrt{S}S​

Assume the Following: LN(S)and LN(Q)have a Correlation Coefficient of -0 $\sqrt{S}$