Question
Consider a put and call option on Company A stock at strike price K. Suppose further that the put premium is greater than call premium,
Consider a put and call option on Company A stock at strike price K. Suppose further that the put premium is greater than call premium, both options expire in 1-year and the 1-year effective interest rate is r.
If call premium - put premium + PV(strike) > PV(forward price), explain how this leads to an arbitrage opportunity.
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The Internet Market Research Audit
Authors: Cambridge
1st Edition
1902433742, 978-1902433745
