Suppose you have the following information concerning a particular options. Stock price, S = RM 21 Exercise
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Question:
Suppose you have the following information concerning a particular options. Stock price, S = RM 21 Exercise price, K = RM 20 Interest rate, r = 0.08 Maturity, T = 180 days = 0.5 Standard deviation, = 0.5
1. a. What is correct of the call options using Black-Scholes model?
b. Compute the put options price using Black-Scholes model.
2. Suppose a European put options has a price higher than that dictated by the put call parity.
a. Outline the appropriate arbitrage strategy and graphically prove that the arbitrage is riskless.
b. Name the options/stock strategy used to proof the put-call parity.
c. What would be the extent of your profit in (a) depend on?
Related Book For
Corporate Finance A Focused Approach
ISBN: 978-1439078082
4th Edition
Authors: Michael C. Ehrhardt , Eugene F. Brigham
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