8. You obtain the following price quotes for call options on Asset ABC. It is now December,...

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8. You obtain the following price quotes for call options on Asset ABC.

It is now December, with the near contract maturing in one month’s time. Asset ABC’s price is currently trading at $50.

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Glancing at the figures, you note that two of these quotes seem to violate some of the rules you learned regarding options pricing.

a. What are these discrepancies?

b. How could you take advantage of the discrepancies? What is the minimum profit you would realize by arbitraging based on these discrepancies?

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Foundations Of Global Financial Markets And Institutions

ISBN: 9780262039543

5th Edition

Authors: Frank J. Fabozzi, Frank J. Jones, Francesco A. Fabozzi, Steven V. Mann

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Question Posted: Oct 21, 2024 05:04 AM

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8. You obtain the following price quotes for call options on Asset ABC. It is now December,...

Question:

Strike Price ($) March Quote ($) January Quote ($) June Quote ($) 486 40 50 11 6 12 7 60 7 8 11.50 8.50 9.00

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Foundations Of Global Financial Markets And Institutions

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