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squenshl

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## Homework Statement

Assume a stock currently has a price S(0) = 1 in dollars units. As a special deal, you may purchase this stock at this price but you sell this stock at a specified time t = T (at the maturity) at the selling price S(T)

^{2}. For example, if at the maturity S(T) = 0.5, you will sell it at the price 0.25. Is this a good deal? Give reason(s).

## Homework Equations

Black-Scholes equation.

## The Attempt at a Solution

I solved the Black-Scholes equation when r = 0 so I solve V

_{t}+ sigma^2*S^2/2*V

_{ss}= 0 with inital condition ((S(T)-K)

^{+})

^{2}and got V(S,t) = e

^{sigma^2(T-t)}*S(T)^2. How can I tell if this is a good deal? Help please.