Consider a call and a put option, both with strike price of $30 and 3 months to expiration. The call trades at $4, the put price is $5, the interest rate is 0, and the price of the underlying stock is...
Consider a call and a put option, both with strike price of $30 and 3 months to expiration. The call trades at $4, the put price is $5, the interest rate is 0, and the price of the underlying stock is $29.
a.Suppose the stock does not pay dividends. Is there an arbitrage? If so, write down the sequence of trades and calculate the arbitrage profit you realize in 3 months. If not, explain why not.
b.Suppose the stock will pay a dividend of $2 in 2 months. Assume all other prices are as above. Is there an arbitrage? If so, write down the sequence of trades and calculate the arbitrage profit you realize in 3 months. If not, explain why not.
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Consider a call and a put option, both with strike price of $30 and 3 months to expiration. The call trades at $4, the put price is $5, the interest rate is 0, and the price of the underlying stock is...
5. Consider a call and a put option, both with strike price of $30 and 3...
5. Consider a call and a put option, both with strike price of $30 and 3 months to expiration. The call trades at $5, the put price is $6, the interest rate is 0, and the price of the underlying stock is $29. (1) Suppose the stock does not pay dividends. Is there an arbitrage? If so, write down the sequence of trades and calculate the arbitrage profit you realize in 3 months. If not, explain why not. (2) Suppose...
. Consider a call and a put option, both with strike price of $30 and 3...
. Consider a call and a put option, both with strike price of $30 and 3 months to expiration. The call trades at $5, the put price is $6, the interest rate is 0, and the price of the underlying stock is $29. (1) Suppose the stock does not pay dividends. Is there an arbitrage? If so, write down the sequence of trades and calculate the arbitrage profit you realize in 3 months. If not, explain why not. (2) Suppose...
A European call option and put option on a stock both have a strike price of...
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A European call option has a strike price of $20 and an expiration date in six...
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Problem 12. A European call and put option on a stock both have a strike price...
Problem 12. A European call and put option on a stock both have a strike price of $30 and an expiration date in three months. The price of the call is $3, and the price of the put is $2.25. The risk free interest rate is 10% per annum, the current stock price is $31. Indentify the arbitrage opportunity open to a trader.
A put option and a call option on a stock have the same expiration date and the same exercise (or strike price). Both options expire in 6 months. Assume that put-call parity holds and interest rate is...
A put option and a call option on a stock have the same expiration date and the same exercise (or strike price). Both options expire in 6 months. Assume that put-call parity holds and interest rate is positive. If both call and put options have the same price, which of the following is true? A) Put option is in-the-money. B) Call option is in-the-money. C) Both call and put options are in-the-money. D) Both call and put options are out-of-the-money.
Microsoft (MSFT) + IMSETI Underlying stock price = $71.75 Expiration Strike Call Put June 16, 2017...
Microsoft (MSFT) + IMSETI Underlying stock price = $71.75 Expiration Strike Call Put June 16, 2017 70 2.02 0.24 June 16, 2017 72 0.67 0.90 June 16, 2017 74 0.132.37 70 July 7, 2017 July 7, 2017 July 7, 2017 72 2.400.58 1.15 1.32 0.42 2.59 74 Refer to Figure 15.1, which lists the prices of various Microsoft options. Use the data in the figure to calculate the payoff and the profit/loss for investments in each of the following July...
A stock's current price is $72. A call option with 3-month maturity and strike price of...
A stock's current price is $72. A call option with 3-month maturity and strike price of $ 68 is trading for 6, while a put with the same strike and expiration is trading for $20. The risk free rate is 2%. How much arbitrage profit can you make by selling the put and purchasing a synthetic put? (Provide your answer rounded to two decimals.) You have purchased a put option for $ 11 three months ago. The option's strike price...
Consider a three-year European call option with the strike price of $150. The underlying stock will...
Consider a three-year European call option with the strike price of $150. The underlying stock will pay $10-dividend two years later from now. The current stock price is $170. The risk-free rate is 3% per annum. Find the range of the call prices that do not allow any arbitrage.
The price of a call option with a strike of $100 is $10. The price of...
The price of a call option with a strike of $100 is $10. The price of a put option with a strike of $100 is $5. Interest rates are 0 and the current price of the underlying is $100. Can you make an arbitrage profit? If so how? Describe the trade and your pay offs in detail?
5. Consider a call and a put option, both with strike price of $30 and 3 months to expiration. The call trades at $5, the put price is $6, the interest rate is 0, and the price of the underlying stock is $29. (1) Suppose the stock does not pay dividends. Is there an arbitrage? If so, write down the sequence of trades and calculate the arbitrage profit you realize in 3 months. If not, explain why not. (2) Suppose...
. Consider a call and a put option, both with strike price of $30 and 3 months to expiration. The call trades at $5, the put price is $6, the interest rate is 0, and the price of the underlying stock is $29. (1) Suppose the stock does not pay dividends. Is there an arbitrage? If so, write down the sequence of trades and calculate the arbitrage profit you realize in 3 months. If not, explain why not. (2) Suppose...
Problem 12. A European call and put option on a stock both have a strike price of $30 and an expiration date in three months. The price of the call is $3, and the price of the put is $2.25. The risk free interest rate is 10% per annum, the current stock price is $31. Indentify the arbitrage opportunity open to a trader.
Microsoft (MSFT) + IMSETI Underlying stock price = $71.75 Expiration Strike Call Put June 16, 2017 70 2.02 0.24 June 16, 2017 72 0.67 0.90 June 16, 2017 74 0.132.37 70 July 7, 2017 July 7, 2017 July 7, 2017 72 2.400.58 1.15 1.32 0.42 2.59 74 Refer to Figure 15.1, which lists the prices of various Microsoft options. Use the data in the figure to calculate the payoff and the profit/loss for investments in each of the following July...
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