1. Construct a payoff and profit diagram for the purchase of a 105-strike call and sale of...
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1. Construct a payoff and profit diagram for the purchase of a 105-strike call and sale of a 95-
strike call. Verify that you obtain exactly the same profit diagram for the purchase of a 105-
strike put and a sale of 95-strike put. Explain the difference in the initial cost of these positions. Assume the following parameters:
• S(0) 5 100; T 5 1; r 5 8%; σ 5 30%
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Related Book For 
Principles Of Financial Engineering
ISBN: 9780123869685
3rd Edition
Authors: Robert Kosowski, Salih N. Neftci
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