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Question 11.10: Spot an arbitrage opportunity if the bond prices are as in F...

Spot an arbitrage opportunity if the bond prices are as in Figure 11.15.

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In the framework of the above example, value a floor expiring at time 2 with strike rate 8%, based on the bond prices in Example 11.5.

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The coupons of the bond with the floor provision d...

Assume the structure of bond prices in Example 11.5 (Figure 11.10). Consider a coupon bond maturing at time 2 with face value F = 100 and coupons C = 1 payable at each step. Find the price of an American call option expiring at time 2 with strike price X = 101.30. (Include the coupon in the bond

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At time 2 the option is worthless. At time 1 we ev...

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Because of the additivity of the logarithmic retur...