Calls and Puts Arbitrage
Tags: #Financial #EconomicsEquation
$$K_{1} < K_{2} < K_{3} \\ K_{2} = \lambda K_{1} + (1  \lambda) K_{3} \\ \lambda = \frac{K_{3}  K_{2}}{K_{3}  K_{1}}$$Latex Code
K_{1} < K_{2} < K_{3} \\ K_{2} = \lambda K_{1} + (1  \lambda) K_{3} \\ \lambda = \frac{K_{3}  K_{2}}{K_{3}  K_{1}}
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Introduction
Equation
Latex Code
K_{1} < K_{2} < K_{3} \\ K_{2} = \lambda K_{1} + (1  \lambda) K_{3} \\ \lambda = \frac{K_{3}  K_{2}}{K_{3}  K_{1}}
Explanation
Latex code for the Calls and Puts Arbitrage. Three different options have strike prices K1, K2, K3 and K1 < K2 < K3 holds. An important formula for determining arbitrage opportunities comes from the following equations.
 : Strike price of option 1
 : Strike price of option 2
 : Strike price of option 3
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