My Math Forum Can someone please help me solve this question?
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 May 11th, 2011, 10:05 PM #1 Newbie   Joined: May 2011 Posts: 2 Thanks: 0 Can someone please help me solve this question? Hi everyone This is my first time in these forums and was wondering if anyone could help me with this question? I enrolled in some finance subjects, and this subject happens to be heavily mathematical, and I am having quite some problems. I am required to derive a proof on reset strike options. CR(S) = Price of Reset Call Option with inital stock price St and reset price Sr. Payoff = Max{St-min(Sr,K),0} PR(S) = Price of Reset Put Option with inital stock price St and reset price Sr. Payoff = Max{max(Sr,K)-St,0} C(S) = Price of Vanilla Call Option with inital stock price St P(S) = Price of Vanilla Put Option with inital stock price St a) Prove that CR(S) >= C(S) and PR(S) >= P(S), for all values S. b) For what values of r do the inequalities above become equalities? I have been struggling with this for quite some time and any help would be greatly appreciated. Thanks in advance!
 May 11th, 2011, 10:08 PM #2 Senior Member     Joined: Jul 2010 From: St. Augustine, FL., U.S.A.'s oldest city Posts: 12,211 Thanks: 521 Math Focus: Calculus/ODEs Re: Can someone please help me solve this question? Hello and welcome! I moved this to "Mathematics and Economics" as you will more likely get an response to this here.
 May 11th, 2011, 10:24 PM #3 Newbie   Joined: May 2011 Posts: 2 Thanks: 0 Re: Can someone please help me solve this question? Woops Thanks for moving it to the correct section, Mark.

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