An investor believes that the share price of share ABC will be 130 in one year. He assesses either buy a long butterfly or a short straddle. A long butterfly consists of a long call option with an exercise price of K1, 2 short call options with exercise price K2 and a long call option with exercise price K3, K2 = {(K1 + K3) the and all options have the same expiration date. A long straddle is a long call option and a long put option with the same exercise price K and due date. a) Briefly discuss differences and similarities between the two strategies (long butterfly, short straddle) based on the investor's perception of the market. The default notation is used, and the following parameter values are given: S0 = 120, o = 0,30, 0 = 0, r = 0,02, og T = 0,75. In addition, K1 = 110, K3 = 150 and K = K2. b) Calculate the prices of the required options using the Black-Schelesmerten formulas. Draw both future cash flows and profits from the two the strategies in a graph of future stock prices along the X-axis. According to the Black-Scholes-Merton model, time 0 is the value of a call option Co = Soe - 6T N(dj) - Ke-T (dz), di In() + (r - 8+)T) avT dy = d; -OT And c) What strategy do you recommend? An investor believes that the share price of share ABC will be 130 in one year. He assesses either buy a long butterfly or a short straddle. A long butterfly consists of a long call option with an exercise price of K1, 2 short call options with exercise price K2 and a long call option with exercise price K3, K2 = {(K1 + K3) the and all options have the same expiration date. A long straddle is a long call option and a long put option with the same exercise price K and due date. a) Briefly discuss differences and similarities between the two strategies (long butterfly, short straddle) based on the investor's perception of the market. The default notation is used, and the following parameter values are given: S0 = 120, o = 0,30, 0 = 0, r = 0,02, og T = 0,75. In addition, K1 = 110, K3 = 150 and K = K2. b) Calculate the prices of the required options using the Black-Schelesmerten formulas. Draw both future cash flows and profits from the two the strategies in a graph of future stock prices along the X-axis. According to the Black-Scholes-Merton model, time 0 is the value of a call option Co = Soe - 6T N(dj) - Ke-T (dz), di In() + (r - 8+)T) avT dy = d; -OT And c) What strategy do you recommend