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Old 03-03-2002, 02:34 PM
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Default Expected Values for options



Make an assumption about the distribution of the stocks price in 1 year (log normal) - and then integrate this against the payout function for the call.


Now the real (and subtle) question - If we take this expected value and take its present value (using the 1 yr spot rate) should it equal the value of the option today?
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