H5.
What is the payoff to the trading strategy if the stock price at expiration is equal to $0 (i.e., the stock price is zero)?
What is the payoff to the trading strategy if the stock price at expiration is equal to $50?
What portfolio of calls (maturity T, any strike) and/or bonds (Zero Coupon Bond paying $1 at time T) will give you the desired payoff?
Group of answer choices
Sell $30 zero-coupon bonds, buy a call option with a strike price of $20, sell two call options with a strike of $40, and sell a call option with a strike price of $80
Buy $30 zero-coupon bonds, sell two call option with a strike price of $30, buy 2 call options with a strike of $40, and sell a call with a strike price of $80
It is not possible to construct this payoff with only calls and bonds
Sell $50 zero-coupon bonds, buy two call with the strike price of $80, buy two calls with a strike price of $40, and sell a call with a strike of $20
Buy $30 zero-coupon bonds, sell a call option with a strike price of $20, buy two call options with a strike price of $40, and sell a call option with a strike price of $80
Buy $30 zero-coupon bonds, buy a call option with a strike price of $20, sell two call options with a strike of $40, and buy a call with a strike price of $80
What portfolio of puts (maturity T, any strike) and/or bonds (Zero Coupon Bond paying $1 at time T) will give you the desired payoff?
Group of answer choices
Buy $30 zero-coupon bonds, buy a put with a strike price of $20, sell two puts with a strike price of $40, buy a put with a strike price of $80
Buy $50 zero-coupon bonds, sell a put with a strike price of $80, buy two puts with a strike price of $40, sell a put with a strike price of $20
Buy $10 zero-coupon bonds, sell a put with a strike price of $80, buy two puts with a strike price of $40, sell a put with a strike price of $20
It is not possible to construct this payoff with only puts and bonds
Buy $10 zero-coupon bonds, buy a put with a strike price of $80, sell two puts with a strike price of $40, buy a put with a strike price of $20
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
