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P(T 1 , T 2 )

P(T 1 , T 2 ) - F(t, T 1 : T 2 ). Figure 3.1: Payoff Diagram for a Forward Contract with Delivery Date T 1 on a T 2 -maturity Zero-coupon Bond. P(T 1 , T 2 ). 0. F(t, T 1 : T 2 ). C(T 1 , T 1 , K: T 2 ) = max [P(T 1 , T 2 ) - K, 0].

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P(T 1 , T 2 )

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  1. P(T1, T2) - F(t, T1: T2) Figure 3.1: Payoff Diagram for a Forward Contract with Delivery Date T1 on a T2-maturity Zero-coupon Bond P(T1, T2) 0 F(t, T1: T2)

  2. C(T1, T1, K: T2) = max [P(T1, T2) - K, 0] Figure 3.2: Payoff Diagram for a European Call Option on the T2-maturity Zero-coupon Bond with Strike K and Expiration Date T1 P(T1, T2) K

  3. P(T1, T2, K: T2) = max [K - P(T1, T2), 0] K P(T1, T2) K Figure 3.3: Payoff Diagram for a European Put Option on the T2-maturity Zero-coupon Bond with Strike K and Expiration Date T1

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