Question: The EKG is a new security with a payoff designed to simulate the electrocardiogram heart race of an excited speculator. For simplicity, you may

The

The "EKG" is a new security with a payoff designed to simulate the electrocardiogram heart race of an excited speculator. For simplicity, you may assume that the risk-free interest rate is zero. a) b) How can you construct the "EKG" payoff by buying and selling calls, buying and (short) selling stock, and borrowing or lending? Be specific about amounts and strike prices! How can you construct the portfolio by buying and selling puts, buying and (short) selling stock, and borrowing or lending? Be specific about amounts and strike prices! Payoff 822329222 90 50 6 Plot Area 20 "EKG" Payoff A 40 60 Spot Price 80 100

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Answer a As to construct a portfolio with a payoff resembling the graphs in order to construct the EKG payoff Buying and selling calls buying and selling short stock and lending or borrowing can all b... View full answer

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