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0
Payoff
−5
−10
−15
−20
0 2 4 6 8 10 12 14 16 18 20
S
5
Payoff
0
0 2 4 6 8 10 12 14 16 18 20
S
0
Payoff
−2
−4
−6
−8
−10
−12
0 2 4 6 8 10 12 14 16 18 20
S
(b) The following plots show the respective payoff diagrams prior to expiration:
Pre−Expiry Payoff of Short Stock and Written ATM Call
10
Short Stock
Write Call
5 Combined
−5
Payoff
−10
−15
−20
−25
0 2 4 6 8 10 12 14 16 18 20
S
2
Pre−Expiry Payoff of Put and Call at K1 and K2
14
Put at K1
Call at K2
12 Combined
10
8
Payoff
0
0 2 4 6 8 10 12 14 16 18 20
S
Pre−Expiry Payoff of Long Put, Short Call at K1, Long Call, Short Put at K2
8
0
Payoff
−2
−4
−6
−8
−10
−12
0 2 4 6 8 10 12 14 16 18 20
S
Problem 2
(a) Assuming a notional amount N. A cashflow takes place every 6 months, beginning in 12
months. The following table summarizes the cashflow:
3
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The Project Gutenberg eBook of
Pauline et Pascal Bruno
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Language: French
EN VENTE:
SOUS PRESSE:
PASCAL BRUNO
PAR
ALEXANDRE DUMAS
PARIS
MICHEL LÉVY FRÈRES, LIBRAIRES-ÉDITEURS
des Œuvres complètes d’Alexandre Dumas,
DE LA BIBLIOTHÈQUE DRAMATIQUE ET DU THÉATRE DE VICTOR HUGO,
Rue Vivienne, 1.
1848
PA U L I N E .
I.