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March 4th, 2017, 02:10 PM   #1
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Financial Engineering

Hi guys,

I have been struggling with this problem way to long. hope some of you can help.

The problem:
I know that when the underlying pays no dividends, the of a European call with a fixed strike must be increasing function of time to maturity.

But in regards of European put option, which the underlying pays dividends at a given yield, q, but the interest rate is neglible (r=0). Then how can i proof that p(T1) <= p(T2) if T1 <= T2 are two maturities and p(T1) and p(T2) denote the
prices of two European put options both with strike K but maturing at T1 and
T2 respectively.
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