Question
A stock price which pays no dividends is $50 and the strike price of a 2 year European put option is $54. The risk free
A stock price which pays no dividends is $50 and the strike price of a 2 year European put option is $54. The risk free rate is 3% (continuously compounded). Find the lower bound for the option such that there are arbitrage opportunities if the price is below the bound and no arbitrage opportunities if it is above the bound. Show your work
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Quantitative Investment Analysis
Authors: Richard A. DeFusco, Dennis W. McLeavey, Jerald E. Pinto, David E. Runkle
3rd edition
111910422X, 978-1119104544, 1119104548, 978-1119104223
