a) A trader creates a bull spread using a put option with a strike price of 95 and a price of 3, and a put option with a strike price of 100 and a price of 6. i. Provide the profit/loss (P/L) diagram of the strategy and the corresponding table showing the P/L under different possible values of the underlying at maturity. ii. What is the market view when one adopts this strategy? iii. Suppose an investor decides to use a short straddle strategy in advance of an earnings announcement. Discuss the reasons why the investor would adopt this strategy and the likely benefits and risks. b) The spot exchange rate between Swiss franc (CHF) and the euro (EUR) is 1.04 CHF/EUR. The interest rates in the Eurozone and Switzerland are 1% and 3%, respectively, with continuous compounding. The 9-month forward exchange rate is 1.02 CHF/EUR. Base your answer on 1,000 units of EUR. i. Create the arbitrage portfolio and calculate the profit/loss from the arbitrage strategy ii. What changes if the forward exchange rate is 1.08 CHF/EUR? Present the calculations in detail. c) Explain why the arguments leading to putcall parity for European options cannot be used to give a similar result for American options. Present the equivalent of the put-call parity for American options.