Let C(K) and P(K) be the premiums of three-month K-strike European call and put options on the
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Let C(K) and P(K) be the premiums of three-month K-strike European call and put options on the same stock, respectively. You are given that |C(60) − C(65)| = 3 and the continuously compounded risk-free interest rate is 5%.
Calculate |P(60) − P(65)|.
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Since CK is decreasing in K we have C60 C65 C60 C65 3 B...View the full answer
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