Question
Consider two corresponding options, consisting of a call and a put with the exact same parameter values. For this pair, the current price of the
Consider two "corresponding" options, consisting of a call and a put with the exact same parameter values. For this pair, the current price of the underlying asset is $84, the options have an exercise price of $96 and they expire in 4 months. Additionally, the risk-free rate is 7% p.a. What is the difference between the premium of the put option, P, and the premium of the call option, C; that is, what is the value of P - C? Write the answer with two decimals; e.g., 3.24. Do NOT use the $ symbol in your answer; just write a numerical value. Of course, include the negative sign if the answer is negative; but do not include the positive sign if the answer is positive. NOTE: Use the continuous time version of the Put-Call Parity equation
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started