Question: Suppose call and put prices are given by: Strike 80 100 105 Call Premium 22 9 5 Put Premium 4 21 24.8 Find the convexity

Suppose call and put prices are given by: Strike 80 100 105 Call Premium 22 9 5 Put Premium 4 21 24.8 Find the convexity violations by computing the change in premium per dollar change in the strike price. What spread would you use to effect arbitrage? (Hint: 1:5:4) Demonstrate that the spread position is an arbitrage.

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