Suppose S = 50, and it pays a dividend of $1 in exactly one month. There are

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Suppose S = 50, and it pays a dividend of $1 in exactly one month. There are three-month European calls and puts on the stock with a strike of 50. The call is trading at a price of 3 while the put is trading at 2.7. Is there an arbitrage, if so tabulate a strategy to take advantage of it. Assume that the risk-free rate is 2% (C.C.)?

Posted Date: May 18, 2024 11:17 PM

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Suppose S = 50, and it pays a dividend of $1 in exactly one month. There are

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