Question: By constructing two portfolios with identical payoffs at the exercise date of the options, derive an expression for the put-call parity of a European option

  1. By constructing two portfolios with identical payoffs at the exercise date of the options, derive an expression for the put-call parity of a European option that has a dividend payable prior to the exercise date. If the equality in does not hold, explain how an arbitrageur can make a riskless profit.

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