hard · Quantitative Finance
Consider a 1-year European call option currently valued at 7.20. A matching down-and-out (D&O) call with the same strike and a barrier below the current spot is valued at 5.85.
Using the principle of in-out parity, what is the fair value of the corresponding down-and-in (D&I) call?
- $13.05
- $5.85
- $1.35
- $0.00
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