(Solution) - Examine the prices of up and out puts with strikes of 0 9 -(2025 Original AI-Free Solution)

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Examine the prices of up-and-out puts with strikes of $0.9 and $1.0 in Table 14.3. With barriers of $1 and $1.05, the 0.90-strike up-and-outs appear to have the same premium as the ordinary put. However, with a strike of 1.0 and the same barriers, the up-and-outs have lower premiums than the ordinary put. Explain why. What would happen to this pattern if we increased the time to expiration?