medium · Quantitative Finance
A stock A has a volatility of σ_A = 30% and stock B has σ_B = 25%.
If their correlation is ρ = 0.40, what is the 'spread volatility' hatσ required to price an exchange option between them?
- 18.17%
- 39.05%
- 27.50%
- 30.41%
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