1-year put option on the same stock with an exercise price of $35 costs $2.1,...
80.2K
Verified Solution
Link Copied!
Question
Finance
1-year put option on the same stock with an exercise price of $35 costs $2.1, the stock price is $33 and the interest rate on a bank deposit per annum is 10%. a) Use the put-call parity relation to calculate the price of a 1-year European call option on the same stock. b) If the market price of the call option is $4, is there an arbitrage opportunity? c) If so, define arbitrage strategy.
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
