give a solution 1.3 and 1.4

hopes the asset price will... The holder of a European put option The writer of a European put option hopes the asset price will. 1.2. Convince yourself that max(S(T) E, 0) + max(E-S(T),0) is equi. alent to ls(T)- and draw the payoff diagram for this bottom straddle. .3.-* Suppose that for the same asset and expiry date, you hold a European call option with exercise price E1 and another with exercise price E3, where E32 El and also write two calls with exercise price E:=(E1+E3)/2. This is an example of a butterfly spread. Derive a formula for the value of this butterfly spread at expiry and draw the corresponding payoff diagram. 1.4. The holder of the bull spread with payoff diagram in Figure 1.3 would like he asset price on the expiry date to be at least as high as E2, but, if it is, the holder does not care how much it exceeds E2. Make similar statements about the holders of the bottom straddle in Exercise 1.2 and the butterfly spread in Exercise 1.3. 1.7 Program of Chapter 1 and walkthrough Our first MATLAB program uses basic plotting commands to draw a bull spread payoff diagram, as shown in Figure 1.3, for particular parameters E, and E2. The program is called ch01 and is storedin the file cho1.n. It is listed in Figure 1.6. The program is run by typing ch01 at the MATLAB prompt. The first three lines begin with the symbol % and hence are comment lines. These lines are ignored