Question
A stock currently sells for $31/share. A 3-month European call option on this stock with a strike price of $30/share has a premium of $3/share.
A stock currently sells for $31/share. A 3-month European call option on this stock
with a strike price of $30/share has a premium of $3/share. A 3-month European put
option on the same stock with a strike price of $30/share has a premium of
$2.25/share. Assume a 10% annual continuously compounded risk-free interest rate.
Is there any arbitrage opportunities exist? If so, what is your arbitrage strategy?
What is your arbitrage profit in three months? Please show all your cash flows from
today as well as at the time of the maturity from your arbitrage strategy.
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Personal Finance Building Your Future
Authors: Robert B. Walker, Kristy P. Walker
1st edition
9780077861728, 978-0073530659
