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1. Suppose that prices of European call options (with the same expiry time) are as shown in the table below Strike 50 70 80 Call

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1. Suppose that prices of European call options (with the same expiry time) are as shown in the table below Strike 50 70 80 Call 15 12 7 (a) [2 marks] Find the convexity violation in these prices (b) [3 marks) Show how you could exploit the convexity violation to gain an arbitrage profit

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