What is the no-arbitrage cost of the put

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Reference no: EM131850242

The current price of a security is s. Suppose that its possible prices at time t are s1 or s2. Consider a K,t European put option on this security, and suppose that K > s1 > s2.

(a) If you buy the put and the security, what is your return at time t?

(b) What is the no-arbitrage cost of the put?

Reference no: EM131850242

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