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52 6. This is another question about portfolios. Here, for a given shape of the profit curve, design the portfolio. (a) Construct a portfolio

    




52 6. This is another question about portfolios. Here, for a given shape of the profit curve, design the portfolio. (a) Construct a portfolio using only Calls where, at time t = T, the profit line is horizontal until price $60. At that point, it has slope 3 until price $70. Then, the line has slope 2 until price $100. Next, it has slope zero until price $110. It then has a slope of -1 until $120. After that, it has slope zero. 2 Options (b) Construct a portfolio with the above behavior but using only Puts. Construct a portfolio with the above behavior using both Puts and Calls.

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