The price of a stock is modeled with a geometric Brownian motion with drift μ=-0.25 and volatility σ=0.4. The stock currently sells for $35.  Assume that an option is available to purchase the stock in six months for $40. Find the expected payoff of the option.

College Algebra
1st Edition
ISBN:9781938168383
Author:Jay Abramson
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Chapter6: Exponential And Logarithmic Functions
Section6.8: Fitting Exponential Models To Data
Problem 3TI: Table 6 shows the population, in thousands, of harbor seals in the Wadden Sea over the years 1997 to...
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The price of a stock is modeled with a geometric Brownian motion with drift μ=-0.25 and volatility σ=0.4. The stock currently sells for $35. 
Assume that an option is available to purchase the stock in six months for $40. Find the expected payoff of the option.

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