Question
1. A stock is trading at $72.12. The call option with the strike price of $75.00 is trading at a premium of $1.03. The put
1. A stock is trading at $72.12. The call option with the strike price of $75.00 is trading at a premium of $1.03. The put option with the same strike price is trading at $3.95. The time to expiry is 11 months and the continuously compounded return is 2.23%.
a) Calculate the profit from the arbitrage opportunity using calls
b) Calculate the profit from the arbitrage opportunity using puts
2. A stock is trading at $62.44. The call option with the strike price of $65.00 is trading at a premium of $6.13. The put option with the same strike price is trading at $8.88. The time to expiry is 299 days and the continuously compounded return is 0.75%.
a) Calculate the profit from the arbitrage opportunity using calls
b) Calculate the profit from the arbitrage opportunity using puts
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Financial Mathematics Derivatives And Structured Products
Authors: Chan
1st Edition
9811336954, 978-9811336959
