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214. Adam Gilbert is a risk manager that works with Global Trade Brokerage Firm in New York City. Global Trade Brokerage is a member of
214. Adam Gilbert is a risk manager that works with Global Trade Brokerage Firm in New York City. Global Trade Brokerage is a member of the options exchange which provides brokerage services to option traders and also works as the market maker in the exchange. Gilbert's job responsibility is to derive upper and lower boundaries for options so the prices are arbitrage-free. Which of the following is an accurate estimation of the lower band for European call option prices on a non-dividend paying stock, if the current stock price is $92 and the strike price of the option on that stock is $89? Suppose the option is expiring in 6 months and the risk-free rate is 8%
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