You are given the following information about a securities market: There are two nondividend-paying stocks, X

Question:

You are given the following information about a securities market:

• There are two nondividend-paying stocks, X and Y .

• The current prices for X and Y are both $100.

• The continuously compounded risk-free interest rate is 10%.

• There are three possible outcomes for the prices of X and Y one year from now:

Outcome 1 2 3 X $200 $50 $0 Y $0 $0 $300

Let C_X be the price of a European call option on X, and P_Y be the price of a European put option on Y . Both options expire in one year and have a strike price of $95.

Calculate P_Y − C_X.

(A) $4.30

(B) $4.45

(D) $4.75

(E) $4.94

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Derivative Pricing

ISBN: 9780367734213

1st Edition

Authors: Ambrose Lo

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Question Posted: Nov 22, 2023 08:11 AM

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You are given the following information about a securities market: There are two nondividend-paying stocks, X

Question:

Outcome 1 2 3 X $200 $50 $0 Y $0 $0 $300

Step by Step Answer:

A Instead of calculating P Y and C X separately we view reg...View the full answer

Derivative Pricing

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