Consider a call option on IBM stock with strike price of $55 and which has 6-months until

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Consider a call option on IBM stock with strike price of $55 and which has 6-months until expiration. The current IBM stock price is $60/share and the continuously compounded interest rate is 10%. The price of this call option is $12/share.

a) What is the price of the put option on IBM, which is identical to call option on time to maturity and exercise price?

b) If the market price for the call option on IBM is $10/share, what would be the arbitrage strategy and profit?

Related Book For answer-question

Risk Management and Financial Institutions

ISBN: 978-1118955949

4th edition

Authors: Hull John

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Posted Date: Sep 14, 2020 12:30 AM

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Consider a call option on IBM stock with strike price of $55 and which has 6-months until

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Risk Management and Financial Institutions

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