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Derivatives and Risk Management, 1st Edition
book

Derivatives and Risk Management, 1st Edition

by Sundaram Janakiramanan
May 2024
Intermediate to advanced content levelIntermediate to advanced
542 pages
27h 26m
English
Pearson India
Content preview from Derivatives and Risk Management, 1st Edition
Combinations of Options: Trading Strategies 311
On the expiry date, when S
T
< S
L
, both the options will not be exercised; hence:
Prot = C
L
C
H
= INR 35 INR 20 = INR 15
When S
L
< S
T
S
H
, the low-exercise-price option will be exercised but the high-exercise-price option will
not be exercised; hence:
Prot = (C
L
C
H
) (S
T
S
L
) = 755 – S
T
us, when S
T
= 755,
Prot = INR 755 – INR 755 = 0,
and when S
T
= INR 760,
Prot = INR 755 INR 760 = –INR 5
When S
T
> S
H
, both the options will be exercised:
Prot = C
L
– (S
T
S
L
) + [(S
T
S
H
) – C
H
]= (S
L
S
H
) + (C
L
C
H
)
us, the prot when S
T
= INR 780 is given by:
Prot = (INR 740 INR 760) + (INR 35 ...
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Publisher Resources

ISBN: 9781299447547Publisher Website