Problem

21. Suppose options trade at two strikes: K1 < K2. You notice that whereas C(K2) &e...

21. Suppose options trade at two strikes: K1 < K2. You notice that whereas C(K2) &emdash; P(K2) = S - PV(K2) (put-call parity) holds for the K2 strike option, it does not hold for the K1 strike option, specifically where Show how you would use a box spread to take advantage of this situation by constructing a risk-less arbitrage strategy. Assume there are no dividends.

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