The one-year European put option at strike 100 (current stock price = 100) is quoted at $10.
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The one-year European put option at strike 100 (current stock price = 100) is quoted at $10. The two-year European put at the same strike is quoted at $4: The term structure of interest rates is flat at 10% (continuously compounded). Is this an arbitrage?
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Not necessarily ...View the full answer
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