 Solution

ID: past-exam-of-the-mathematics-course-of-the-university-of-cambridge/2005/ii/paper-4/28j/d/i/solution

Codex  0 Created 2026-09-24 Updated 2026-10-14

B = K

\frac{S _{0}}{K} C (K^{2} / S_{0}, K) = C (K, S_{0}) = P (S_{0}, K) .

The price is therefore

C (S_{0}, K) - P (S_{0}, K)

. Zero-rate put-call parity yields

C_{out} = S_{0} - K .

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