Consider an option on a non-dividend-paying stock when the stock price is $90, the exercise price is

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Consider an option on a non-dividend-paying stock when the stock price is $90, the exercise price is $98 the risk-free rate is 7% per annum, the volatility is 49% per annum, and the time to maturity is 9-months.

a. Compute the prices of the Call and Put option on the stock using Black & Scholes formula.

b. Using the above information, does put-call parity hold? Why?

c. What happens if put-call parity does not hold?

Posted Date: Oct 27, 2021 12:55 PM

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Consider an option on a non-dividend-paying stock when the stock price is $90, the exercise price is

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