An option pays f st2st1 for some reasonable function f show


Suppose a stock St follows a jump-diffusion process such that jumps can only occur in the time period from 0 to t1. An option pays f (St2/St1) for some reasonable function f. Show that there is a unique arbitrage-free price for f and write down an expression for it.

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Engineering Mathematics: An option pays f st2st1 for some reasonable function f show
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