medium · Quantitative Finance derivatives
A desk uses the Margrabe formula to price an option to exchange 1 share of Asset B for 1 share of Asset A. S_A = 100, S_B = 100, σ_A = 20%, σ_B = 30%, ρ = 0.5.
What is the 'volatility of the spread' hatσ used in the Black-Scholes calculation?
- 36.06%
- 50.00%
- 10.00%
- 26.46%
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