YBM's stock price S is $102 today. After six months, the stock price can either go up to $115.63212672, or go down to $93.52995844. Options mature after T = 6 months and have an exercise price of K = $105. The continuously compounded risk-free interest rate r is 5 percent per year. Given the above data, suppose that a trader quotes a put price of $5. What is the arbitrage profit that you can make today by trading this call and related securities?

Answer rating: 100% (QA)

To determine if there is an arbitrage opportunity we need to compare the market price of the put opt... View the full answer