Price(non-dividend-stock) = 100 dollars Risk free rate = 5 % 1 year european call option (strike =

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Price(non-dividend-stock) = 100 dollars

Risk free rate = 5 %

1 year european call option (strike = 100 * e^(0,05*1), and the premium is 11,93)

A 1,5 year european = strike price = 100 * e^(0,05*1,5) and the premium is 11,5)

Show the arbitrage.

Related Book For answer-question

Derivatives Markets

ISBN: 978-0321543080

4th edition

Authors: Rober L. Macdonald

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Posted Date: Apr 29, 2024 09:15 AM

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Price(non-dividend-stock) = 100 dollars Risk free rate = 5 % 1 year european call option (strike =

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To show arbitrage we need to find a situation where we can make a riskfree profit by exploiting pric... View the full answer

Derivatives Markets

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