Question: Exercise 1.5 Let A(O) = 100, A(1) = 112 and S(0) = 34 dollars. Is it possible to find an arbitrage opportunity if the forward

Exercise 1.5 Let A(O) = 100, A(1) = 112 and S(0)

= 34 dollars. Is it possible to find an arbitrage opportunity if

Exercise 1.5 Let A(O) = 100, A(1) = 112 and S(0) = 34 dollars. Is it possible to find an arbitrage opportunity if the forward price of stock is F = 38.60 dollars with delivery date 1? Exercise 1.7 Let A(0) = 100, A(1) = 110, S(O) = 100 dollars S(1) = (120 with probability p. 80 with probability 4. Compute the price C() of a call option with exercise time 1 and a) strike price $90, b) strike price $110

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