The price of a non-dividend paying stock is $19 and the price of a three-month European call

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The price of a non-dividend paying stock is $19 and the price of a three-month European call option on the stock with a strike price of $20 is $1. The continuously compounded risk-free rate is 4% per annum.

a) Determine the price of a three-month European put option with a strike price of $20.

b) Suppose that the market price of the European put price is $2. Explain the arbitrage opportunities that may exist if there

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Derivative Pricing

ISBN: 9780367734213

1st Edition

Authors: Ambrose Lo

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Posted Date: Dec 12, 2023 04:43 AM

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The price of a non-dividend paying stock is $19 and the price of a three-month European call

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Derivative Pricing

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