This forum is for discussing our interview question book. If you want the answer to a follow-up question or to dispute the solutions, this is the place to ask.
I am confused on why suddenly Black's formula comes into picture, and why S_T^2 can be write in as that.
Would you please explain or point to some reference related?
- Posts: 2
- Joined: Fri Jul 13, 2012 2:58 pm
the Black formula always applies when you have a call option on a lognormal quantity.
A square of a log-normal is also log-normal. So all we have to do is rewrite it as its mean
times a log-normal with mean 1 in order to fit it into the Black formula.
- Site Admin
- Posts: 1345
- Joined: Fri Jul 27, 2007 7:21 am
Return to Quant Job Interview Questions and Answers
Who is online
Users browsing this forum: No registered users and 1 guest