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Consider an investment strategy in the option markets. You buy an European call (c 1 ) with an exercise price K 1 and, at the

  1. Consider an investment strategy in the option markets. You buy an European call (c1) with an exercise price K1 and, at the same time you sell another European call (c2) with exercise price K2, where K2>K1. Assume maturities of both options are the same. Graph and set the payoffs for each option and, the final payoff of your strategy. Analyze and discuss.

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Creating a graph for the described option strategy involves plotting the payoff functions for the long and short calls followed by adding those togeth... blur-text-image

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