Another european vanilla call option with stike price k2 gt

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Reference no: EM13619382

The riskless interest rate R>0

the underlier is trading at a spot price S and all options are European vanillas on the same underlier and have the same maturity date T greater or equal to 0

A) What are the no-arbitrage boundary conditions for the value of a European Vanilla Call option with strike price K1 ?

B) Another European vanilla call option with stike price K2 > K1 is trading in the market. What are the new no-arbitrage boundary conditions for the value of the European vanilla call options with strike price K1?

C)Another European vanilla call option with strike price K3 is trading in the market. At the expiry of the three options (I.e at T=0). What are the new no arbitrage boundary conditions for the value of the european vanilla call option with strike price K1, if K3<K1<K2 and K1-K3 =K2-K1?

Reference no: EM13619382

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