Maybank shares are currently trading at RM10.00 in the stock market. 3-month call and put options...

 

Transcribed Image Text:

Maybank shares are currently trading at RM10.00 in the stock market. 3-month call and put options with RM 10.00 exercise price are being quoted at RM0.90 and RM0.50 respectively. The risk-free rate is currently at 6% per year. Assume European options. (a) Using put-call parity and applying both mathematical and diagram method prove that there are mispricing on the spot price, call and put options. [12 marks] (b) Indicate your arbitrage strategy and compute the profit amount you can make for one lot/contract. Assume that 3 months later Maybank share is at RM11.00 [13 marks] Maybank shares are currently trading at RM10.00 in the stock market. 3-month call and put options with RM 10.00 exercise price are being quoted at RM0.90 and RM0.50 respectively. The risk-free rate is currently at 6% per year. Assume European options. (a) Using put-call parity and applying both mathematical and diagram method prove that there are mispricing on the spot price, call and put options. [12 marks] (b) Indicate your arbitrage strategy and compute the profit amount you can make for one lot/contract. Assume that 3 months later Maybank share is at RM11.00 [13 marks]

Answer rating: 100% (QA)

a value of Call Vc Present value of stoike price Value of put Up value adeo 4 share RM 090 RM 10 Erm... View the full answer