Question
Suppose that c1, c2, and c3 are the prices of European call options with strike prices K1, K2, and K3, respectively, where K3 > K2
Suppose that c1, c2, and c3 are the prices of European call options with strike prices K1, K2, and K3, respectively, where K3 > K2 > K1 and K3 K2 = K2 K1. All options have the same maturity. Assuming no arbitrage, what is the relation between c1, c2, and c3?
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Multinational Business Finance
Authors: David K. Eiteman, Arthur I. Stonehill, Michael H. Moffett
15th edition
134796551, 134796550, 978-0134796550
