Assume the Black-Scholes framework. Two actuaries, A and B, are computing the prices of a European call
Question:
Assume the Black-Scholes framework. Two actuaries, A and B, are computing the prices of a European call and a European put using different parameters.
You are given:
Describe the relationship between the call price computed by Actuary A and the put price computed by Actuary B.
Transcribed Image Text:
Actuary A B Option Call Put Underlying Strike Dividend Stock Price Price Yield 5% 3% 190 200 200 190 Risk-free Stock Interest Rate Volatility 30% 30% 3% 5% Option Maturity 1
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The call price computed by Actuary A turns out to be identical to the put pri...View the full answer
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