Use risk-neutral valuation to calculate the price of the, Financial Management

Use risk-neutral valuation to calculate the price of the

A financial institution plans to offer a security that pays off a dollar amount equal to at time T, where S_T is the price at time T of a stock that pays no dividends.

(a) Use risk-neutral valuation to calculate the price of the security at time t in terms of the stock price S at time t.

(b) Confirm that your price satisfies the differential equation.

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Financial Management: Use risk-neutral valuation to calculate the price of the

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