# Exercise 2.2 from the book “The concept and practice of Mathematical Finance”

I am a newbie. Please help me understand how to resolve the exercise 2.2 from the book "The concept and practice of Mathematical Finance". The solution from the book says that our super-replicating portfolio will be $\alpha$ shares and $\beta$ bonds. It must dominate at zero. This implies that $\beta$ >= 0. First of all, what does it mean "it must dominate at zero". Secondly, why if it dominates at zero, then $\beta$ >= 0? Thanks so much for your help!

## Solution

• Hi Jack, could you please post the question as well? Not every user has easy access to the book. – jaamor Feb 28 '15 at 18:12
• Here is the question, Each of the following products pays a function of spot price, S, of a non-dividen-paying stock one year from now. If there is no interest rates and spot is 100, give the optimal upper and lower bounds on their prices today. (i) The pay-off is 1 between 110 and 130 and zero otherwise. – dullboy Feb 28 '15 at 21:25