Strike price510 15 20 Call option E8754 Table 12.1: Option prices in Question 12.4 Coursework question 12.4 Let a contingent claim be given with maturity one month and written on one stock. Suppose that the payoff of is . 30 if the price of the underlying stock is greater or equal to 20. . 15 if the price of the underlying stock is less or equal to 5 and interpolated linearly for the interval [5,20]. a) Draw a payoff diagram of contingent claim b) Show that the payoff of the contingent claim also can be achieved with a suitable combination of short and long call and put options 121 c) Suppose you can buy and sell call and put options according to the prices in Ta- ble 12.1. If somebody would offer you to buy the contingent claim for 15, would you buy it? Justify your answer. Strike price510 15 20 Call option E8754 Table 12.1: Option prices in Question 12.4 Coursework question 12.4 Let a contingent claim be given with maturity one month and written on one stock. Suppose that the payoff of is . 30 if the price of the underlying stock is greater or equal to 20. . 15 if the price of the underlying stock is less or equal to 5 and interpolated linearly for the interval [5,20]. a) Draw a payoff diagram of contingent claim b) Show that the payoff of the contingent claim also can be achieved with a suitable combination of short and long call and put options 121 c) Suppose you can buy and sell call and put options according to the prices in Ta- ble 12.1. If somebody would offer you to buy the contingent claim for 15, would you buy it? Justify your