Question
Q4) r = 5% (c.c.), T (option expiry) = 6 months. Assume we have the following table of call option prices: Strike Price Call
Q4) r = 5% (c.c.), T (option expiry) = 6 months. Assume we have the following table of call option prices: Strike Price Call Premium K = 79 $6.06 K2 80 = $5.62 K3=84 $3.67 a) Find A so that K = 2K + (1 )K3. b) Is there a possible arbitrage? Justify your answer. c) If there is a possible arbitrage, what is your arbitrage portfolio?
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Venture capital and the finance of innovation
Authors: Andrew Metrick
2nd Edition
9781118137888, 470454709, 1118137884, 978-0470454701
