The price of TTK stock is currently trading at $40. Assuming that TTK is not planning to pay any dividends in the next four years. There is a three-year European call option in the market using TTK stock as the underlying asset with an exercise price of 25. The risk-free rate is 3% (continuously compounded).

What is a lower bound for the option such that there are arbitrage opportunities if the price is below the lower bound and no arbitrage opportunities if it is the lower bound?

Answer rating: 100% (QA)

To determine the lower bound for the European call option on TTK stock we can use the concept of noa... View the full answer