You are given that the price of a 70-strike call option is 8.3 and the price of

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You are given that the price of a 70-strike call option is 8.3 and the price of a 80-strike call option is 2.7, where both options expire in one year and have the same underlying asset.

The continuously compounded risk-free interest rate is 6%.

You create a one-year 70-80 long bear spread using put options. If the amount of profit from the bear spread is 4, calculate the 1-year stock price.

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Derivative Pricing

ISBN: 9780367734213

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Authors: Ambrose Lo

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Question Posted: Nov 22, 2023 08:11 AM

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You are given that the price of a 70-strike call option is 8.3 and the price of

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Note that a 7080 bear spread constructed using puts has the same profit as ...View the full answer

Derivative Pricing

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