Question
Please type the answer by computer, so i can see it clearly, thank you!! The current price of a 6-month European put option on a
Please type the answer by computer, so i can see it clearly, thank you!!
The current price of a 6-month European put option on a dividend-paying stock is $2. The current stock price is $95, the strike price is $100, and the annual interest rate is 5%. A dividend of $0.3 is anticipated to pay in 8 months.
1(a) is the boundary condition violated? Explain your answer
1(b) Verify your trading positions taken at point in time for the arbitrage opportunity
1(c) what is the arbitrage strategy based on put-call parity if a European call with the identical price and expiry, trading at $2 is observed?
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