Question
A call that is $2 in-the-money trades for $4 today. A put written on the same stock that is $2 out-of-the-money trades for $2.25 today.
A call that is $2 in-the-money trades for $4 today. A put written on the same stock that is $2 out-of-the-money trades for $2.25 today. Both options expire in 6 months and the risk free rate is 10% p.a. continuously compounded while the stock trades for $40. Are there any arbitrage opportunities available? If yes state the arbitrage strategy and prove
that it works.
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New Issues In Financial Institutions Management
Authors: F Fiordelisi, P Molyneux, D Previati
2010th Edition
0230278108, 978-0230278103
