Suppose a European put price exceeds the value predicted by put-call parity. How could an investor profit?

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Suppose a European put price exceeds the value predicted by put-call parity. How could an investor profit? Demonstrate that your strategy is correct by constructing a payoff table showing the outcomes at expiration.

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Introduction To Derivatives And Risk Management

ISBN: 9781305104969

10th Edition

Authors: Don M. Chance, Robert Brooks

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Question Posted: Apr 07, 2016 08:32 AM

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Suppose a European put price exceeds the value predicted by put-call parity. How could an investor profit?

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If the put price is higher than predicted by the model the put is ov...View the full answer

Introduction To Derivatives And Risk Management

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