Maybank shares are currently trading at RM10.00 in the stock market. 3-month call and put options...
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Maybank shares are currently trading at RM10.00 in the stock market. 3-month call and put options with RM 10.00 exercise price are being quoted at RM0.90 and RM0.50 respectively. The risk-free rate is currently at 6% per year. Assume European options. (a) Using put-call parity and applying both mathematical and diagram method prove that there are mispricing on the spot price, call and put options. [12 marks] (b) Indicate your arbitrage strategy and compute the profit amount you can make for one lot/contract. Assume that 3 months later Maybank share is at RM11.00 [13 marks] Maybank shares are currently trading at RM10.00 in the stock market. 3-month call and put options with RM 10.00 exercise price are being quoted at RM0.90 and RM0.50 respectively. The risk-free rate is currently at 6% per year. Assume European options. (a) Using put-call parity and applying both mathematical and diagram method prove that there are mispricing on the spot price, call and put options. [12 marks] (b) Indicate your arbitrage strategy and compute the profit amount you can make for one lot/contract. Assume that 3 months later Maybank share is at RM11.00 [13 marks]
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Answer rating: 100% (QA)
a value of Call Vc Present value of stoike price Value of put Up value adeo 4 share RM 090 RM 10 Erm... View the full answer
Related Book For
Essentials of Corporate Finance
ISBN: 978-1260013955
10th edition
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan
Posted Date:
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