View Full Version : ASM 14.18 Exchange Option
03-06-2007, 10:43 AM
in the calculation of d1 for excersice 14.18, why does the numerator use the dividend rates, and not the log of the quotient. The 2 stocks start of at different values. Why is this equivalent? What am I missing?
03-06-2007, 10:58 AM
Stock = strike.
A dollar bill has a different value than a stock costing $50, but if I tell you that the strike price is 50 dollar bills, you compare 50 to 50, not 1 to 50. Here, the strike price is 1.2S and S=50, so 1.2S=60.
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