Consider a call option and put option on the same underlying stock with the same exercise price
Question:
Consider a call option and put option on the same underlying stock with the same exercise price and time to maturity. The call price is $2.59, the underlying stock price is $28.63, the exercise price on both options is $26.18, the risk-free rate is 6.21%, the time to maturity on both options is 0.47 years, and the stock pays a $1.64 / share dividend in 0.28 years. Determine the price of the put price now.
16. The Put-Call Parity equation claims that one Put Option is equivalent to a replicating portfolio consisting of one Call Option, short one Stock, and a Bond paying a face value equal to the exercise price of the put and call options. Determine if the payoff at maturity of the replicating portfolio is equivalent to the payoff at maturity of a put option.
The current stock price of a company is $37.50, the potential up movement / period of the stock price is 22.0%, the potential down movement / period of the stock price is -13.00%, the risk-free rate is 4.0% per period, the exercise price of an one-period American call option on the stock is $39.00, the exercise price of an one-period American put option on the stock is $39.00, the time to maturity for both options is 0.58 years, and the number of periods for both options is 1 (i.e. a one period binomial tree). Determine the current prices of the call and put.
An Introduction to the Mathematics of Financial Derivatives
ISBN: 978-0123846822
3rd edition
Authors: Ali Hirsa, Salih N. Neftci