List and describe the simple no arbitrage relationships

Reference no: EM131243387

1. Graph the payoff diagram for the following straddle: one long call option with a strike price of $50 and one long put option with a strike price of $60.

2. List and describe the simple no-arbitrage relationships, preferably both in words and in algebra.

3. How would you cook up a numerical example in which you would want to exercise anAmerican put before expiration? Is your American put in-the-money or out-of-the-money?

Reference no: EM131243387

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