By using Eq. 2.15, differences in the value of CE(S,t) - PE(S, t) are computed. C-...

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By using Eq. 2.15, differences in the value of CE(S,t) - PE(S, t) are computed. C- P=S - E eCT-es (a) As shown above, if S> E, then the CE(S, t)- PE(S, t) difference decreases with an increase in E. Why? Is it because CE(S, t) decreases in value? Or does Pp(S, t) increase in value? Or both? Support your answer. (b) The above analysis was done for S greater than the present value of E. Carry out the same analysis if S is less than the present value of E. That is, find what happens should i. E increase (i.e., buying options with higher strike prices), ii. should E decrease, iii. should r increase, iv. should T -t be larger, and v. should S decrease. By using Eq. 2.15, differences in the value of CE(S,t) - PE(S, t) are computed. C- P=S - E eCT-es (a) As shown above, if S> E, then the CE(S, t)- PE(S, t) difference decreases with an increase in E. Why? Is it because CE(S, t) decreases in value? Or does Pp(S, t) increase in value? Or both? Support your answer. (b) The above analysis was done for S greater than the present value of E. Carry out the same analysis if S is less than the present value of E. That is, find what happens should i. E increase (i.e., buying options with higher strike prices), ii. should E decrease, iii. should r increase, iv. should T -t be larger, and v. should S decrease.

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CP SE ert If sE then cP decreases ... View the full answer