The range forward contract is specified as follows at expiry, the holder must buy the asset for E 1 if S E 1 , for S if E 1 S E 2 and for E 2 if S E 2 Find the relationship between E 1 and E 1 when the initial value of the contract is zero and E 1 E 2 ...

E1 and E2 must be equal in order for the initial value of the contract to be zero The range forwar ...

The range forward contract is specified as follows: at expiry, the holder must buy the asset for

Question:

The range forward contract is specified as follows: at expiry, the holder must buy the asset for E₁ if S < E₁, for S if E₁ ≤ S ≤ E₂ and for E₂ if S > E₂. Find the relationship between E₁ and E₁ when the initial value of the contract is zero and E₁ < E₂.