Exercise 8.4.6 Prove that American options on a non-dividend-paying stock satisfy C P S X.

Question:

Exercise 8.4.6 Prove that American options on a non-dividend-paying stock satisfy C − P ≥ S− X. (This and relation (8.3) imply that American options on a nondividend-

paying stock satisfy C − S+ X≥ P ≥ C − S+PV(X).)➤ Exercise 8.6.1 Consider the portfolio of puts and put on the portfolio in Theorem 8.6.1. Because both provide a floor of

i ωi Xi , why do they not fetch the same price?

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