Question
A stock is priced at $48.24 per share. The stock does not pay dividends. A European put option on the stock is priced at $1.74
A stock is priced at $48.24 per share. The stock does not pay dividends. A European put option on the stock is priced at $1.74 per share. The put option expires in 2 months and has a strike price of $44 per share. Suppose the interest rate for continuous compounding is 2.48%.
To rule out arbitrage, what is the price per share of an otherwise similar call option?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
To rule out arbitrage we can use putcall parity which states that the difference in price between a ...
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Introduction To Derivatives And Risk Management
Authors: Don M. Chance, Robert Brooks
10th Edition
130510496X, 978-1305104969
