(a) Consider a European Call Option with a strike of 82. The current price of the underlying...
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(a) Consider a European Call Option with a strike of 82. The current price of the underlying asset is 80, and the time to expiry is 5 months. The current market price of the option is 6.22. The risk-free rate is 4.1%.
(b) You believe the true volatility is 28.4%. Is the option underpriced or overpriced? Hence what position should you take in option to make money. Explain.
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