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Please draw the charts also. 1.A portfolio we have talked about recently consists of (1) buying a European call on a security having exercise price
Please draw the charts also.
1.A portfolio we have talked about recently consists of (1) buying a European call on a security having exercise price E and (2) simultaneously buying a Treasury security having face E (same as exercise price of the call) and discount-to-face ratio . a. What would be the payoff pattern on this portfolio? b. Explain how a dealer could short this portfolio and what the payoff pattern would be.
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