Prove the following bounds on European call options C(S, t), with expiry at time T, on an
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Prove the following bounds on European call options C(S, t), with expiry at time T, on an underlying share price S, with no dividends:
(a) C ≤ S,
(b) C ≥ max(S − Ee−r(T−t), 0),
(c) 0 ≤ C1 − C2 ≤ (E2 − E1)e−r(T−t),
where C1 and C2 are calls with exercise prices E1 and E2 respectively, and E1 < E2.
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