Question 1 Given This is a portfolio consised with 3 european call option with same maturity(6 month to Maturity). The Spot price of portfolio at maturity = ST. Call prices: C1=6.654, C2=9.049, C3=11.444. Strike prices: X1=50, X2=60, X3=70. S10=40, S20=50, S30=60. Risk-free rate = 15%. Assuming that the Variance = 0.64 for all options, e2.71828, and o dividends occur. i) To solve this problem is that you must construct a portfolio with the above three call options first, and do some scenario analysis (i.e. compare strike prices with the spot price and work out the portfolio value at maturity). The no-arbitrage pricing condition also applies. ii) Using the result in part (i) and put-call parity, show that P2 = 0.5(P1 + P3) In this case, P1, P2 & P3 are option prices for three European Put options with strike prices x1,x2 & Xz. Note that x1, x2 & xz follow the same relationship as given in the part (i) Question 1 Given This is a portfolio consised with 3 european call option with same maturity(6 month to Maturity). The Spot price of portfolio at maturity = ST. Call prices: C1=6.654, C2=9.049, C3=11.444. Strike prices: X1=50, X2=60, X3=70. S10=40, S20=50, S30=60. Risk-free rate = 15%. Assuming that the Variance = 0.64 for all options, e2.71828, and o dividends occur. i) To solve this problem is that you must construct a portfolio with the above three call options first, and do some scenario analysis (i.e. compare strike prices with the spot price and work out the portfolio value at maturity). The no-arbitrage pricing condition also applies. ii) Using the result in part (i) and put-call parity, show that P2 = 0.5(P1 + P3) In this case, P1, P2 & P3 are option prices for three European Put options with strike prices x1,x2 & Xz. Note that x1, x2 & xz follow the same relationship as given in the part (i)