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The risk-free rate is 3.8%. An asset currently sells for $82. A 5-month call option with an exercise price of $85 costs $10.80 and an
The risk-free rate is 3.8%. An asset currently sells for $82. A 5-month call option with an exercise price of $85 costs $10.80 and an identical put costs $12.79. Assuming that there are no transaction costs and using discrete-time math for any discounting that you do, how much of an arbitrage profit can you make from Put-Call-Futures Disparity?
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Lets calculate the theoretical prices of the call and put options using the putcall parity relationship C P S X 1 rt Where C Call option price P Put option price S Current price of the underlying asse...
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Microeconomics An Intuitive Approach with Calculus
Authors: Thomas Nechyba
1st edition
538453257, 978-0538453257
