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Financial engineering deals with the design of new assets. Draw the payoff (at t=1) of the following bull butterfly spread: 1. Purchase 1 call with
Financial engineering deals with the design of new assets. Draw the payoff (at t=1) of the following bull butterfly spread:
1. Purchase 1 call with exercise price a
2. Sell 2 calls with exercise price (a+b)/2
3. Purchase 1 call with exercise price b
as a function of the underlying stock price S at t=1 where a=20 and b=60.
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