Exercise 11.5.1 A range forward contract has the following payoff at expiration: 0 if the exchange rate
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Exercise 11.5.1 A range forward contract has the following payoff at expiration:
0 if the exchange rate S lies within [ XL, XH ], S− XH if S > XH, S− XL if S < XL.
It guarantees that the effective future exchange rate will lie within XL and XH.
Replicate this contract with standard options.
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