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plz write neatly and circle u answer only answer to red!!! Don't just copy other Chegg answer!!! (1 point) This problem establishes a relationship between
plz write neatly and circle u answer only answer to red!!! Don't just copy other Chegg answer!!!
(1 point) This problem establishes a relationship between cash-or-nothing call option values and cash-or-nothing put option values, sometimes called cash-or-nothing put-call parity". The discount factor for the period t = 0 tot =T is dor, and we assume an ideal bank which pays interest on deposits and will make loans at the rate corresponding to this discount factor. An asset has value So at t = 0, and will have unknown value Sy at time T. At time t = 0, you construct a portfolio consisting of one cash-or-nothing call option and one cash-or-nothing put option on this asset, both options with the same strike and expiration. A cash-or-nothing call option with strike based on the asset is selling for Co and will pay (at t =T) Cr = 1 if S >K Cr = if S = K Cr=0 if SStep by Step Solution
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