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Suppose call prices are given by Strike 80 100 105 Call Premium 22 9 5 Find the convexity violations. What spread would you use the

Suppose call prices are given by

Strike 80 100 105

Call Premium 22 9 5

Find the convexity violations. What spread would you use the effect arbitrage? Demonstrate that spread position is an arbitrage by creating a table, which shows possible profit opportunities at the time to maturity. Assume option's time to maturity in 1 year and continuously compounded interest rate is 4%.

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