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Two put options on the same underlying, both expiring in 1 month. Put option 1 struck at $50 is priced at $5 while put
Two put options on the same underlying, both expiring in 1 month. Put option 1 struck at $50 is priced at $5 while put option 2 struck at $53 priced at $3. Is there an arbitrage opportunity in this setting? If so, show how to take the advantage. For simplicity, interest rate is assumed zero.
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Answer Call option is the right to buy the underlying asset at a specif...
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Derivatives Markets
Authors: Robert McDonald
3rd Edition
978-9332536746, 9789332536746
