Question
A European call and a European put on a stock have the same strike price and time to maturity. At 10:00am on a certain day,
A European call and a European put on a stock have the same strike price and time to maturity. At 10:00am on a certain day, the price of the call is $3 and the price of the put is $4. At 10:01am news reaches the market that has no effect on the stock price or interest rates, but decreases volatilities. As a result the price of the call changes to $1.50. Which of the following is correct?
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Investments An Introduction
Authors: Herbert B Mayo
11th Edition
1133936520, 9781133936527
