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Suppose a Corp Inc. call option sells for $2.6 and a Corp. Inc. put option trades at $0.57. Both options are European, have a
Suppose a Corp Inc. call option sells for $2.6 and a Corp. Inc. put option trades at $0.57. Both options are European, have a strike price of $8 and expire in one month. Corp Inc's stock price is $10.47 per share. Assume that the riskless interest rate is 1%. Do these option prices obey the put-call parity relationship above? If not, how would you implement arbitrage? Describe the profit today and future cash flows for the arbitrage strategy, if any.
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To determine if the call and put options on Corp Inc stock obey the putcall parity relationship we c...
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Fundamentals Of Corporate Finance
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford
5th Edition
0135811600, 978-0135811603
