Suppose you short the S&R index for $1000 and buy a 1050-strike call. Construct payoff and profit

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Suppose you short the S&R index for $1000 and buy a 1050-strike call. Construct payoff and profit diagrams for this position. Verify that you obtain the same payoff and profit diagram by borrowing $1029.41 and buying a 1050-strike put. Discuss.

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Derivatives Markets

ISBN: 978-0321543080

4th edition

Authors: Rober L. Macdonald

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Question Posted: Dec 18, 2015 04:56 AM

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Suppose you short the S&R index for $1000 and buy a 1050-strike call. Construct payoff and profit

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This is another application of PutCallParity Initially we have the following cost to enter into the ...View the full answer

Derivatives Markets

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