5. The diagram below shows the payoff of an option strategy and its payoff at year 2. 87 81 11 76 77 1 72 67 9 a. What is the name of this recognized option trading strategy? [1 Mark] b. Describe, using a combination of put and call options only, how the pay-off of this option strategy could be replicated. [2 Marks] Assume that interest rates are 5% for each period and that there are no dividends. [5 Marks] C. Find the no-arbitrage price of this option strategy. trader expects realised volatility to be lower than current implied volatility. d. Explain whether the trader should buy or sell the above option strategy, given his expectation [2 Marks] 5. The diagram below shows the payoff of an option strategy and its payoff at year 2. 87 81 11 76 77 1 72 67 9 a. What is the name of this recognized option trading strategy? [1 Mark] b. Describe, using a combination of put and call options only, how the pay-off of this option strategy could be replicated. [2 Marks] Assume that interest rates are 5% for each period and that there are no dividends. [5 Marks] C. Find the no-arbitrage price of this option strategy. trader expects realised volatility to be lower than current implied volatility. d. Explain whether the trader should buy or sell the above option strategy, given his expectation [2 Marks]