Question
The FBM KLCI and index options possess the following values : FBM KLCI = 730 points 740 call = 7 points 740 put = 2
The FBM KLCI and index options possess the following values :
FBM KLCI = 730 points 740 call = 7 points 740 put = 2 points The spot index can be traded.
The risk-free rate is 5% per annum. The options expire in 60 days.
Required:
(i) Draw a graph of arbitrage strategy and the relevant positions. (2 marks)
(ii) Prove that this arbitrage is riskless. (2 marks)
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Auditing Cases An Active Learning Approach
Authors: Mark S. Beasley, Frank A. Buckless, Steven M. Glover, Douglas F. Prawitt
2nd Edition
0130674842, 978-0130674845
