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  3. 3. assume that you hold the following portfolio of

3. Assume that you hold the following portfolio of European options on the same stock:...

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3. Assume that you hold the following portfolio of European options on the same stock: - Long on a put with strike price of $30; - Long on one call with strike price of $30; - Short on two call with strike price of $40; - Long a call option with strike price of $50. All options expire in 3 months. Assume that the stock price today is $39 and that the stock volatility is 24%. The continuously compounded risk-free interest rate is 5%. Finally, assume that the Black-Scholes framework holds. 1. Compute the price of your portfolio; 2. Draw the profit diagram for the portfolio specified above; 3. Show that the put-call parity holds for the call and put option with strike price of $30

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