Sketch an arbitrage argument for the price of a butterfly spread to be bounded by 0

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Sketch an arbitrage argument for the price of a butterfly spread to be bounded by 0 ≤ Π_t ≤ e^−r(T−t)ΔK for t ≤ T.

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A First Course in Quantitative Finance

ISBN: 978-1108419574

1st edition

Authors: Thomas Mazzoni

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Question Posted: Dec 17, 2018 04:37 AM

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Sketch an arbitrage argument for the price of a butterfly spread to be bounded by 0

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From its construction it is clear that fo...View the full answer

A First Course in Quantitative Finance

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