Consider the standard Black-Scholes model
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Consider the standard Black-Scholes model

Exercise 7.6

Consider the standard Black-Scholes model. Derive the arbitrage free price process for the claim X where X is given by X = S(T1)/S(T0). The times T0 and T1 are given and the claim is paid out at time T1.

Hint
StatisticsBlack-Scholes model is called as the Black-Scholes-Merton model. It is one of the very important concepts in the modern financial theory. Also, the mathematical equation estimates the derivative's theoretical value of other investment instruments, where the impact of time and other risk factors is taken in to account....

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