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USING THE GIVEN INFORMATION: K=$55, r=9.53%, S 0 = $55, T=1yr, c=7, p=1 Is there an arbitrage strategy? If so, what is the correct strategy?

USING THE GIVEN INFORMATION: K=$55, r=9.53%, S0 = $55, T=1yr, c=7, p=1

  • Is there an arbitrage strategy? If so, what is the correct strategy?
  • Draw out its relevant CF table as done in the lecture video
  • What is its arbitrage profit?
  • hint: use put-call parity relationship

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