Using the call-put parity , compute the value of a 9-month European put on a stock with
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Question:
- Using the call-put parity, compute the value of a 9-month European put on a stock with current price of US$ 25 and strike price of US$ 27, where the value of an European call on the same stock and with the same strike price is US$ 2.5 and the rf equals 10% annual.
Based on your previous answer, if the market price of the put is US$ 2.35, identify the existence of an arbitrage opportunity and explain how you can profit from it.
Related Book For
Introduction To Stochastic Finance With Market Examples
ISBN: 9781032288277
2nd Edition
Authors: Nicolas Privault
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