Question
Put-call Parity. SC stock is currently at $10, and it costs $7 to buy an at-the-money call option on SC maturing one year from now.
Put-call Parity. SC stock is currently at $10, and it costs $7 to buy an at-the-money call option on SC maturing one year from now. The price of a risk free zero coupon bond with a face of $100 maturing one year from now is $95. (SC does not pay dividend)
If the call described above is European, what is the price of an at-the-money European put with one year maturity?
If the call described above is American, what do we know about the price today of the same European put options with one year maturity?
If the call is described above is American, what do we know about the price today of an at-the-money American put option on SC maturing one year from now?
Use the Black-Scholes to show the prices of European call and European put when the time to maturity is infinity and the underlying does not pay dividend?
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