9.14 Generalization(continued) Proof with an Example f>0.633,e.g.=0.65 >△Sa千=025*20-065=435<4.367 t=0 Sr=18 Sr=22 Buy A Shares-500018*0.25=4.5022*025=550 Borrow 4.367 at r 4.367 4.50 4.50 Se∥call 0.650 Net flows 0.017 00 0 Options, Futures, and Other Derivatives, 4th edition@ 2000 by John C. Hull Tang Yincai, Shanghai Normal UniversityOptions, Futures, and Other Derivatives, 4th edition © 2000 by John C. Hull Tang Yincai, Shanghai Normal University 9.14 Generalization (continued) : Proof with an Example • If f > 0.633, e.g. f=0.65 ==> D S0 -f=0.25*20-0.65=4.35<4.367 t = 0 ST=18 ST=22 Buy D Shares -5.000 18*0.25=4.50 22*0.25=5.50 Borrow 4.367 at r 4.367 -4.50 -4.50 Sell call 0.650 0 -1 Net Flows 0.017 0 0 •