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Show that if p and k then there is a buying strategy

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Reference no: EM132968301

Problem 1: Suppose that P is the price of a European put option to sell a security whose present price is S. Let K be the strike price of the option. Show that if P > K then there is a buying and/or selling strategy that yields risk-less profit at expiration (i.e. arbitrage is present). You may assume the interest rate is r = 0 so that present value calculations are unnecessary.

Reference no: EM132968301

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