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A European call option and a put option on a stock both have a strike price of $20 and an expiration date in three months.
A European call option and a put option on a stock both have a strike price of $20 and an expiration date in three months. Both sell for $3. The risk-free interest rate is 10% per annum, the current stock price is $19, and a $1 dividend is expected in one month.
a. Some stocks are hard to borrow so that put-call parity can be violated in certain situations. Please write down some reasons why a stock may be hard to borrow.
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