Consider a modified butterfly position with K 1 2 3, and a > 0. How is a

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Consider a modified butterfly position

with K₁2 3, and a > 0. How is a to be chosen to guarantee a vanishing payoff for S_T = K₁ and S_T = K₃?

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A First Course in Quantitative Finance

ISBN: 978-1108419574

1st edition

Authors: Thomas Mazzoni

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Question Posted: Feb 19, 2020 09:19 AM

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Consider a modified butterfly position with K 1 2 3, and a > 0. How is a

Question:

IlButterfly = C(K1, T) – a · C(K2, T) + C(K3, T) %3D

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The value of a should be chosen such that the payof...View the full answer

A First Course in Quantitative Finance

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