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Exercise 3: Pricing a special European-style straddle (6 Marks) Assume the market setup of the previous exercise A special European-style straddle option on a non-dividend-paying

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Exercise 3: Pricing a special European-style straddle (6 Marks) Assume the market setup of the previous exercise A special European-style straddle option on a non-dividend-paying stock provides the following payoff function at time t-T 200-2STif S Sy-100 5ST 200 if S2 200

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