Problem

21. A stock is trading at S = 50. There are one-month European calls and puts on the stock...

21. A stock is trading at S = 50. There are one-month European calls and puts on the stock with a strike of 50. The call is trading at a price of CE = 3. Assume that the one-month rate of interest (annualized) is 2% and that no dividends are expected on the stock over the next month.

(a) What should be the arbitrage-free price of the put?

(b) Suppose the put is trading at a price of PE = 2.70. Are there any arbitrage opportunities?

Step-by-Step Solution

Request Professional Solution

Request Solution!

We need at least 10 more requests to produce the solution.

0 / 10 have requested this problem solution

The more requests, the faster the answer.

Request! (Login Required)


All students who have requested the solution will be notified once they are available.
Add your Solution
Textbook Solutions and Answers Search
Solutions For Problems in Chapter 10