Exercise 8.3.3 In a certain world in which a non-dividend-paying stocks price at any time is known,

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Exercise 8.3.3 In a certain world in which a non-dividend-paying stock’s price at any time is known, a European call is worthless if its strike price is higher than the known stock price at expiration. However, Exercise 8.3.2 says that C ≥ S−PV(X), which is positive when S > PV(X). Try to resolve the contradiction when X> S >

PV(X).

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