3 20 long european put 2 30 short borrow ke rt

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Unformatted text preview: e −rt . PREMIUM 0 C = P + S − Ke −rt STRIKE -10 0 10 20 30 40 50 60 70 80 90 100 50 50 OUT OF THE MONEY OPTION PRICE (arbitrary) UA - DISCOUNTED STRIKE (arbitrary) UNDERLYING ASSET LEVEL (arbitrary) 25 0 -25 IN THE MONEY 40 30 20 PREMIUM 10 BREAKEVEN 0 STRIKE -50 0 10 20 30 40 50 60 70 80 90 100 UNDERLYING ASSET LEVEL (arbitrary) Derivatives I: R. J. Hawkins -10 0 10 20 30 40 50 60 70 80 UNDERLYING ASSET LEVEL (arbitrary) Econ 136: Financial Economics 15/ 18 90 100 The Synthetic Put 50 OPTION PRICE (arbitrary) OUT OF THE MONEY Synthetic Portfolio IN THE MONEY 40 1 PREMIUM 10 Short the underlying. 3 20 Long European call. 2 30 Long (lend) Ke −rt . BREAKEVEN 0 P = C − S + Ke −rt STRIKE -10 0 10 20 30 40 50 60 70 80 90 100 50 50 IN THE MONEY OPTION PRICE (arbitrary) DISCOUNTED STRIKE - UA (arbitrary) UNDERLYING ASSET LEVEL (arbitrary) 25 0 -25 OUT OF THE MONEY 40 30 20 BREAKEVEN 10 PREMIUM 0 STRIKE -50 0 10 20 30 40 50 60 70 80 90 100 UNDERLYING ASSET LEVEL (arbitrary) Derivatives I: R. J. Hawkins -10 0 10 20 30 40 50 60 70 80 UNDERLYING ASSET LEVEL (arbitrary) Econ 136: Financial Economics 16/ 18 90 100 The Covered...
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This note was uploaded on 01/23/2014 for the course ECON 136 taught by Professor Szeidl during the Fall '08 term at University of California, Berkeley.

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