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Based on the put-call parity relationship you want to make an arbitrage profit by selling a call, buying a put, and taking a leveraged equity
Based on the put-call parity relationship you want to make an arbitrage profit by selling a call, buying a put, and taking a leveraged equity position. Stock proce = $100 Call price (6-month maturity with strike price of $110) = $5 Put price (6-month maturity with strike price of $110) = $8 Risk free interest rate (continuously compounded) = 10% If the stock price at maturity is $120, how much do you earn from all these positions?
Stock proce = $100
Call price (6-month maturity with strike price of $110) = $5
Put price (6-month maturity with strike price of $110) = $8
Risk free interest rate (continuously compounded) = 10%
If the stock price at maturity is $120, how much do you earn from all these positions?
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