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Chart 1 below shows the cash flow of a portfolio of financial instruments on a specific future date T as a function of it (at
Chart 1 below shows the cash flow of a portfolio of financial instruments on a specific future date T as a function of it (at time 0 unknown) future share price S (T). 25 20 15 Tid Tkontantstrom 10 M 5 0 0 10 20 30 40 SO 60 70 80 90 100 SIT) chart 1: Time T cash flow to portfolio as a function of S (T). a) How would you put together this portfolio if you only can use call options? b) How will you put together this portfolio if you could not use call options, but put options and any others instruments? c) Can you say something about the time 0 value of the portfolio without using specific option pricing models (and market data)? Chart 1 below shows the cash flow of a portfolio of financial instruments on a specific future date T as a function of it (at time 0 unknown) future share price S (T). 25 20 15 Tid Tkontantstrom 10 M 5 0 0 10 20 30 40 SO 60 70 80 90 100 SIT) chart 1: Time T cash flow to portfolio as a function of S (T). a) How would you put together this portfolio if you only can use call options? b) How will you put together this portfolio if you could not use call options, but put options and any others instruments? c) Can you say something about the time 0 value of the portfolio without using specific option pricing models (and market data)
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