Suppose that c1, c2, and c3 are the prices of European call options with strike prices
Chapter 11, Problem 11.25(choose chapter or problem)
Suppose that c1, c2, and c3 are the prices of European call options with strike prices K1, K2, and K3, respectively, where K3 > K2 > K1 and K3 K2 K2 K1. All options have the same maturity. Show that c2 6 0:5c1 c3 (Hint: Consider a portfolio that is long one option with strike price K1, long one option with strike price K3, and short two options with strike price K2.)
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