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Your customers are interested in the following contract.
Your customers are interested in the following contract. They are willing to commit to buying a stock at a fixed price of $85 at a future date if the price of the stock P is between $80 and $90, but would like to pay the market price at that time if the price of the stock P satisfies is either less than $80, or higher than $90.
a. Plot the payoff of the contract requested by the client.
b. Is it possible to replicate this position using only the stocks, puts and calls? If you think that it is portfolio. If you think that it is impossible explain why.
