Mathematical finance question #2
 

Find the black scholes formula for the option paying D dollars if

min[S1(T),S2(T)] > K, and paying 0 otherwise, in the B-S continuous time model:

dSi(t)= Si(t)[Muidt + SigmaidWi(t)] where i=1,2, where W1 and W2 are two independent Brownian motions.

Mu is the return and Sigma is the volatility.

-Barron

Re: Mathematical finance question #2
 

are you trying to get us to do your homework?

Re: Mathematical finance question #2
 

[ QUOTE ]
are you trying to get us to do your homework?

[/ QUOTE ]

I would think so because this problem is very uninteresting.

Re: Mathematical finance question #2
 

[ QUOTE ]
Find the black scholes formula for the option paying D dollars

[/ QUOTE ]

I think I found it in Options Futures and other Derivative Securities by John C Hull. Does that mean I get a dounut?

Re: Mathematical finance question #2
 

I am not going to work this out for you, but if the white noise terms are not correlated this is really trivial. Just think of this like binomial tree problem except with four possible outcomes instead of two.

Re: Mathematical finance question #2
 

[ QUOTE ]
are you trying to get us to do your homework?

[/ QUOTE ]

i guess the problem wasn't that interesting. i'll post better ones.

no im not trying to get my homework done on here...just thought discussing this stuff would cement my understandinga nd ability to utilize it.

Barron