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Question 3 : Implied Volatility and Put - Call Parity ( 3 / 1 0 ) . Suppose S = 1 0 0 and there
Question : Implied Volatility and PutCall Parity
Suppose and there are both a month European call and a month European
put with The continuously compounded riskfree rate is and there are no
payouts.
i The call currently trades at a price of What is the BlackScholes implied
volatility?
ii The put trades at an implied volatility of Is there an arbitrage opportunity
here? If so how would you take advantage of it and what are the cash flows?
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