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Past exam of the mathematics course of the University of Cambridge
/
2024
/
iii
/
Paper 211
/
2
/
c
/
Solution
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Past exam of the mathematics course of the University of Cambridge
2024
iii
Paper 211
2
c
Created
2026-09-24
Updated
2026-09-25
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If
K
1
≤
K
2
, then
pointwise
(
S
T
−
K
1
)
+
≥
(
S
T
−
K
2
)
+
.
(1)
The positive pricing
formula
under the
T-forward measure
gives
C
t
T
,
K
=
B
t
T
E
Q
T
[(
S
T
−
K
)
+
∣
F
t
]
.
(2)
Therefore
C
t
T
,
K
1
≥
C
t
T
,
K
2
, so the call price is non-increasing in strike.
Ancestors
(11)
c
2
Paper 211
iii
2024
Past exam of the mathematics course of the University of Cambridge
Mathematics course of the University of Cambridge
Course of the University of Cambridge
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