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AMEX stock is currently trading at $150. The price of a European call on AMEX with a strike price of $150 is $5. The call
AMEX stock is currently trading at $150. The price of a European call on AMEX with a strike price of $150 is $5. The call expires in 1-month. The risk-free rate is 2.5%.
A. What is the fair value of a European put on AMEX which has a $150 strike and expires in 1-month?
B. A European put on AMEX which has a $150 strike and expires in 1-month is currently trading for $6. How can you arbitrage this situation and make a risk-free profit?
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