Question
It is currently Nov 1 and the stock price for ZZZ Corp is 113.25. The risk-free rates are 7.30% (Nov), 7.50% (Dec) and 7.62%(Jan). The
It is currently Nov 1 and the stock price for ZZZ Corp is 113.25. The risk-free rates are 7.30% (Nov), 7.50% (Dec) and 7.62%(Jan). The expiration dates for the options are Nov 15, Dec 20, and Jan 17. Assume the options are European and no dividends are paid. | ||||||
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Strike | Nov | Dec | Jan | Nov | Dec | Jan |
105 | 8.4 | 10 | 11.5 | 1.3 | 1.3 | 2 |
110 | 4.4 | 7.1 | 8.3 | 0.9 | 2.5 | 3.8 |
115 | 1.5 | 3.9 | 5.3 | 2.8 | 4.8 | 4.8 |
Question 1 options:
Using the options data from the spreadsheet FNCE4408_Assignment-02.xlsx, do the Nov 105 CALL and PUT options represent an arbitrage opportunity? (Answer YES or NO. Hint use the put-call parity)
If so, the arbitrage strategy would be to:
1. (Answer BUY or SELL)
the CALL option.
2. (Answer INVEST or BORROW)
the PV(X), which amounts to (Answer should be to 2 decimal places and no dollar sign)
3. (Answer BUY or SELL)
the PUT option, and
4. 1. (Answer BUY or SHORT)
the STOCK
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