A power put option pays off maxx-st02nbspat time t where st, Financial Management

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A power put option pays off maxx-st02nbspat time t where st

A power put option pays off [max(X-ST,0)]² at time T, where ST is the stock price at time T and X is the exercise price. A stock price is currently $30. It is known that at the end of one year it will be either $34 or $26. The risk-free rate of interest with continuous compounding is 8% per annum. Calculate the value of a one year power put option with an exercise price of $29.

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Financial Management: A power put option pays off maxx-st02nbspat time t where st

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Financial Management: A power put option pays off maxx-st02nbspat time t where st

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