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hw0799
05-07-2007, 01:20 AM
in Jam's "practice essay problem #2", the value of the collar option = value of caplet + value of floorlet., by using black's model, treat them as options in a forward risk neutural world. :popcorn:

collar equal to buy a floor and sell a cap.

so why not the value of a collar = value of caplet-value of floorlet? thanks.

hershey220
05-07-2007, 11:40 AM
Carmody mentioned that it was a typo, but I thought that the collar = buying a floor and selling a cap.

bagheera
05-07-2007, 10:03 PM
Carmody mentioned that it was a typo, but I thought that the collar = buying a floor and selling a cap.

Collar is buying a cap and selling a floor.