Compute profit diagrams for the following ratio spreads: a. Buy 950-strike call, sell two 1050-strike calls. b.

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Compute profit diagrams for the following ratio spreads:

a. Buy 950-strike call, sell two 1050-strike calls.

b. Buy two 950-strike calls, sell three 1050-strike calls.

c. Consider buying n 950-strike calls and selling m 1050-strike calls so that the premium of the position is zero. Considering your analysis in (a) and (b), what can you say about n/m? What exact ratio gives you a zero premium?

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Derivatives Markets

ISBN: 9789332536746

3rd Edition

Authors: Robert McDonald

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Question Posted: Aug 12, 2015 02:31 AM

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Compute profit diagrams for the following ratio spreads: a. Buy 950-strike call, sell two 1050-strike calls. b.

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a Profit diagram of the 12 950 1050strike ratio call spread the future value of t...View the full answer

Derivatives Markets

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