Show that for any constant 0a1ltbrgtcak1 1-ak2 ack1 , Ask an Expert

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Show that for any constant 0=a=1,
C(aK1 + (1-a)K2) = aC(K1) + (1-a)C(K2)
where C(k) is the European option price with strike K. All the options in this question are assumed to be written on the same stock, and have same maturity date. Note: The butterfly is a special case when a=0.5.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M9522608

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