A European call with strike $58 and expiry in three months trades at $3. A put is

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A European call with strike $58 and expiry in three months trades at $3. A put is offered on the same underlying with the same strike and expiry, for $1.50. The annual default-free discount rate is 5%.

In an arbitrage free market, what is the price of the underlying?

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Introduces Quantitative Finance

ISBN: 978-0470319581

2nd edition

Authors: Paul Wilmott

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Posted Date: Apr 27, 2024 11:32 AM

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A European call with strike $58 and expiry in three months trades at $3. A put is

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To find the price of the underlying asset in an arbitragefree market we can use putcall parity Putca... View the full answer

Introduces Quantitative Finance

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