1. An investor has just obtained the following quotes for a European option on GE stock worth $31. Features of both options are following. European synthetic call $3 European synthetic put $2.25 Strike price $30 Expiration 3 months Risk free rate 10% annual Find an arbitrage opportunity from put-call parity.
1. An investor has just obtained the following quotes for a European option on GE stock worth $31. Features of both options are following. European synthetic call $3 European synthetic put $2.25 Strike price $30 Expiration 3 months Risk free rate 10% annual Find an arbitrage opportunity from put-call parity.
Chapter5: Currency Derivatives
Section: Chapter Questions
Problem 27QA
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Single and multi-option arbitrage:
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