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Calls : An Arbitrage Opportunity? Suppose that c = 3 S0 = 20 T = 1 r = 10% K = 18 D = 0

Calls: An Arbitrage Opportunity?

Suppose that c = 3 S0 = 20 T = 1 r = 10% K = 18 D = 0

Is there an arbitrage opportunity?

c + Ke -rT = p + S0 The Put-Call Parity Result

Suppose that

c = 3 S0 = 31

T = 0.25 r = 10%

K =30 D = 0

What are the arbitrage possibilities when p = 2.25 ?

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