Derivatives: Model-free Relationships between Option Prices

2. Given current price of European call options with three different strike prices K 80 100 110 140 5.0 2.6 c(K) 14.0 Find an upper bound of the price of the call option with strike 100, c(100), by using the information of c (80) and c(110) a. b. Find a lower bound of c(100) by using the information of c(110) and c(140) c. If the market price of c (100) is 9.0, can you find an arbitrage opportunity? If yes, demonstrate your strategy. d. If the market price of c(100) is 5.3, can you find an arbitrage opportunity? If yes, demonstrate your strategy 2. Given current price of European call options with three different strike prices K 80 100 110 140 5.0 2.6 c(K) 14.0 Find an upper bound of the price of the call option with strike 100, c(100), by using the information of c (80) and c(110) a. b. Find a lower bound of c(100) by using the information of c(110) and c(140) c. If the market price of c (100) is 9.0, can you find an arbitrage opportunity? If yes, demonstrate your strategy. d. If the market price of c(100) is 5.3, can you find an arbitrage opportunity? If yes, demonstrate your strategy