Payoff of Box Spread memory, reserve

yuoska

How do you get the answer if CFAI asks this Question again?

1) pull it from memory
2) calculate it from 4 max()
3) use graph
4) ...

I want to reserve the memory for GIPS.

Darien

deriv108 Wrote:
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> I think the payoff of the box spread = Xh-Xl.
> RFR is a return.


It will be Xh - Xl - Net premium paid

former

I think the payoff of the box spread = Xh-Xl.
RFR is a return.

bodhisattva

Becuase excessive (arbitrary) profit can be made if market prices of the Put/Call are fair.

Am I right ?

Unforseen

Why is it risk free rate?

cityboy

gjertsen Wrote:
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> Payoff to the box spread is just the risk free
> rate. Sure hope the questions might be that
> simple. Am I missing something?

Only if the markets are efficient. You'll make a return above the risk free rate if one of the components is mispriced.

mik82

markCFAIL Wrote:
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> Only when your girl is in town.... tell her hello
> for me.


can i watch? plz i promise i wont make much noise

Zestt

Payoff to the box spread is just the risk free rate. Sure hope the questions might be that simple. Am I missing something?

strikethree

Only when your girl is in town.... tell her hello for me.

lcai

lets not forget latency, which is arguably more important than speed above 1333 mhz.