Question: Arbitrage 3 . Suppose that Call premium = $ x Spot price of asset = $ 2 0 Time to maturity = 1 r =

Arbitrage 3.
Suppose that
Call premium =$x
Spot price of asset =$20
Time to maturity =1
r=10%
Strike price K=$18
The asset pays no dividend.
What value of the call premium X eliminates the arbitrage opportunity? Prove that your answer
is correct by writing down the full arbitrage steps and showing that profit $$ amount is in fact
$0.
Arbitrage 3. Suppose that Call premium =$x Spot price of asset

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