Give optimal upper and lower bounds on their prices today

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Reference no: EM131168938

Each of the following products pays a function of the spot price, S, of a non-dividend-paying stock one year from now. If there are no interest rates and spot is 100, give optimal upper and lower bounds on their prices today.

(i) The pay-off is l between 110 and 130 and zero otherwise;

(ii) The pay-off is S - 80;

(iii) The pay-off is zero below 80, increases linearly from zero at 80 to 20 at 120 and then is constant at 20 above 120;

(iv) The pay-off is (S - 100)².

Reference no: EM131168938

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