Calls and Puts with Different Strikes
Tags: #Financial #EconomicsEquation
Latex Code
1 2 3 4 5 | K_{1} < K_{2} \\0 \le c(K_{1}) - c(K_{2}) \le (K_{2} - K_{1})e^{-rT} \\0 \le p(K_{2}) - p(K_{1}) \le (K_{2}) - K_{1})e^{-rT} \\\frac{c(K_{1}) - c(K_{2})}{K_{2} - K_{1}} \ge \frac{c(K_{2}) - c(K_{3})}{K_{3} - K_{2}} \\\frac{p(K_{1}) - p(K_{2})}{K_{2} - K_{1}} \le \frac{p(K_{3}) - p(K_{2})}{K_{3} - K_{2}} |
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Equation
Latex Code
1 2 3 4 5 | K_{1} < K_{2} \\0 \le c(K_{1}) - c(K_{2}) \le (K_{2} - K_{1})e^{-rT} \\0 \le p(K_{2}) - p(K_{1}) \le (K_{2}) - K_{1})e^{-rT} \\\frac{c(K_{1}) - c(K_{2})}{K_{2} - K_{1}} \ge \frac{c(K_{2}) - c(K_{3})}{K_{3} - K_{2}} \\\frac{p(K_{1}) - p(K_{2})}{K_{2} - K_{1}} \le \frac{p(K_{3}) - p(K_{2})}{K_{3} - K_{2}} |
Explanation
Latex code for the Calls and Puts with Different Strikes. For European calls and puts, with strike prices K_{1} and K_{2}, where K_{1} < K_{2}, we know the following.
: Call option of strike price K_{1}
: Call option of strike price K_{2}
American options, For three different options with strike prices K1 < K2 < K3:
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