Question
Call options with strikes of $30, $35, and $40 have option premiums of $1.50, $1.70, and $2.00, respectively. Using strike price convexity, which option premium,
Call options with strikes of $30, $35, and $40 have option premiums of $1.50, $1.70, and
$2.00, respectively. Using strike price convexity, which option premium, if any, is not possible?
a) C(30)
b) C (35)
c) C (40)
d) All are possible
Answer is D) All are possible, but I don't understand how to obtain the answer. Can you please explain?
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Basic Finance An Introduction To Financial Institutions, Investments, And Management
Authors: Herbert B. Mayo
12th Edition
1337691011, 978-1337691017
