# Detailing a proposition about option pricing model coherence

On page 4 of this paper, the author states the following:

"Looking at the limit case, when the strike tends towards 0, we should have the price of a forward contract and it should not depend on the equity skew around 0."

I cannot interpret mathematically what the author stated. Could you please provide a mathematical explanation of what the author said in words?

Thank you!

The value of a call option at expiry is $V=\mathrm{max}(0, S_t-K)$.
If you set $K=0$, then you have $V=\mathrm{max}(0, S_t)$, and since $S\geqslant0$, $\mathrm{max}(0, S_t) = S_t$ - i.e. ie's equivalent to holding the stock, which at expiry you'll expect to be worth the whatever the forward is.
• The price today of a contract that will pay off $S_T$ at maturity is, pretty much by definition, the forward price. – noob2 May 30 '17 at 17:02