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Execute an arbitrage strategy for the period of 16/3/2022 14/4/2022 The fair value of the call option is 2.50 on 16th/3/22, calculated with the help
Execute an arbitrage strategy for the period of 16/3/2022 14/4/2022
The fair value of the call option is 2.50 on 16th/3/22, calculated with the help of the binomial pricing model, so the call is underpriced
The fair value of the put is 2.80 on 16/3/22, calculated with the help of the binomial pricing model, so the put is overpriced
Question - So how can I create an arbitrage strategy with only one mispriced option (either call or put) using put-call parity. Please help.
CALL AFMG MAR23 18 CALL AFMG MAR23 18-OPT STRIKE PRICE PUT AFMG MAR23 18 PUT AFMG MAR23 18-OPT STRIKE PRICE 16/3/22 14/4/22 2.30 4.74 18.00 18.00 3.88 2.08 18.00 18.00Step by Step Solution
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