Question
Suppose one-year call/put premiums for different strike prices are given by the following table below. Find a strategy of reproducing the same payoff from those
Suppose one-year call/put premiums for different strike prices are given by the following table below. Find a strategy of reproducing the same payoff from those options as
a. Draw the payoff diagram
b. What is a strategy which generates the exact payoff? Write the shares for each option. Long position as + and shot position as - . For example, if it is purchasing 2 shares of 8-strike call, then write +2; if it is selling 1 share of 8-strike put, then write -1.
number of shares for:
8 strike call, 8 strike put, 9 strike call, 9 strike put, 10 strike call, 10 strike put
c. what is the initial cost of the position? explain
S-9, if SStep by Step Solution
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