Consider the following portfolio: (i) one sold (written) European put option; (ii) one bought (held) European call
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Question:
Consider the following portfolio:
(i) one sold (written) European put option;
(ii) one bought (held) European call option;
(iii) one short-sold unit of stock (the same stock that both the put and call options are written over);
(iv) one loan (for which the portfolio is the lender) for $105.
At time t, S = $110, X = $110, c (call option price) = $15, p ( put option price) = $10. R(t,T) = 1.1
a) If at time T, S = $120 calculate the net outcome (value) of the portfolio.
b) Assume now at T that S = $100. Calculate the net outcome (value) of the portfolio at T.
c) What observation can be made about the put-call parity relationship?
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