Question
Suppose Company A's stock price is $100. There is a call option with an exercise price of $110 and 1-year maturity. The price of the
Suppose Company A's stock price is $100. There is a call option with an exercise price of $110 and 1-year maturity. The price of the call option is $9. There is also a put option on Company A's stock with an exercise price of $110 and 1-year maturity. The price of the put option is $12. The risk-free rate is 5%. Is there an arbitrage opportunity here? What are we going to buy and sell?
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solution Apply PutCall Parity equation C X1r t S 0 P where C is call premium9 P is Put premium12 ...
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Corporate Finance Core Principles and Applications
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford
3rd edition
978-0077971304, 77971302, 978-0073530680, 73530689, 978-0071221160, 71221166, 978-0077905200
