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Suppose call prices on the same underlying asset are given as follows: (a) Is there any violation of convexity of the premium? (b) What spread

Suppose call prices on the same underlying asset are given as follows:

image text in transcribed

(a) Is there any violation of convexity of the premium?

(b) What spread would you suggest to effect arbitrage?

(c) Find the maximum and minimum profits in the spread of part (b) if the interest rate is zero.

Strike Price ($) Premium ($) 100 36 110 28 120 19 Strike Price ($) Premium ($) 100 36 110 28 120 19

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