Tag Info

New answers tagged

1

For the terminal distributions, I don't have the closed-form solution to hand, but it's computable, since we can price power options (with payoffs like $(S_T^n-K)^+$). You need to find $$ E[S_T C_{K,T}] = \int_K^\infty x(x-K) \cdot p_{BS}(x) dx \\=-Ke^{(r-q)T} C_{K,T} + \int_K^\infty x^2 \cdot p_{BS}(x) dx $$ The latter formula is just a power-option ...



Top 50 recent answers are included