Question
A stock is trading at 100. A one month European put on the stock with a strike of 105 costs $3. Suppose the rate of
A stock is trading at 100.
A one month European put on the stock with a strike of 105 costs $3.
Suppose the rate of interest is 12% per year for all maturities.
Then, given this data, there is an arbitrage opportunity, which involves, among other things
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Financial Markets and Institutions
Authors: Jeff Madura
11th Edition
1133947875, 9781305143005, 1305143000, 978-1133947875
