a. Illustrate putcall parity today and at option expiry assuming stock prices at expiry (S_T) of 400p and of 500p.

b. Draw a graph showing the prices at expiry of a fiduciary call and another one showing a protective put, including all of their components, in relation to the price of the stock in a range between 350p and 600p.

c. Suppose that instead of the information given above you find the following market data (all other information provided above remains the same):

• Call price (c₀) = 38p
• Put price (p₀) = 54p
• Risk-free interest rate (r) = 4%

Explain how you could exploit the potential arbitrage opportunity that is implied by these prices.

An investor is provided with the following information on London Stock Exchange: American put and call options on a share of a company listed on the Call price (co) 33p Put price (Po) 49p Exercise price (X) = 480p Today: 11 June 2019 Expiry date: 20 December 2019 Current stock price (So) 458p Risk-free interest rate (r) 2.4% The company pays no dividends. An investor is provided with the following information on London Stock Exchange: American put and call options on a share of a company listed on the Call price (co) 33p Put price (Po) 49p Exercise price (X) = 480p Today: 11 June 2019 Expiry date: 20 December 2019 Current stock price (So) 458p Risk-free interest rate (r) 2.4% The company pays no dividends