Prove put-call parity for simple barrier options: C D/O + C D/I P D/O P
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Prove put-call parity for simple barrier options:
CD/O + CD/I − PD/O − PD/I = S − Ee−r(T−t),
where CD/O is a European down-and-out call, CD/I is a European down and-in call, PD/O is a European down-and-out put and PD/I is a European down-and-in put, all with expiry at time T and exercise price E.
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Proof Let C be the value of a European call option and P be the value of a European pu...View the full answer
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