Question

A European put option on Tata Steel stock at the
strike price of Rs.440 with expiry of three months, is Rs. 30 with
risk-free interest rate of 7% per annum and the current price of
stock is Rs. 435. Identify the arbitrage opportunities open to a
trader if the put price is Rs. 40 or 20.

Answer #1

A
European call option and put option on a stock both have a strike
price of $20 and an expiration date in three months. Both sell for
$2. The risk-free interest rate is 5% per annum, the current stock
price is $25, and a $1 dividend is expected in one month. Identify
the arbitrage opportunity open to a trader.

A European call option and put option on a stock both have a
strike price of $25 and an expiration date in four months. Both
sell for $4. The risk-free interest rate is 6% per annum, the
current stock price is $23, and a $1 dividend is expected in one
month. Identify the arbitrage opportunity open to a trader.

A
European call option and put option on a stock both have a strike
price of $20 and an expiration date in three months. Both sell for
$3. The risk-free interest rate is 10 % per aunum, the current
stock price is $19 , and a $1 dividend is expected in one month.
identify the arbitrage oppotunity to a trader.

The strike price for a European call and put option is $56 and
the expiration date for the call and the put is in 9 months. Assume
the call sells for $6, while the put sells for $7. The price of the
stock underlying the call and the put is $55 and the risk free rate
is 3% per annum based on continuous compounding. Identify any
arbitrage opportunity and explain what the trader should do to
capitalize on that opportunity....

A European put option is currently worth $3 and has a strike
price of $17. In four months, the put option will expire. The stock
price is $19 and the continuously compounding annual risk-free rate
of return is .09. What is a European call option with the same
exercise price and expiry worth? Also, given that the price of the
call option is $5, show how is there an opportunity for
arbitrage.

The price of a European put that expires in six months and has a
strike price of $100 is $3.59. The underlying stock price is $102,
and a dividend of $1.50 is expected in four months. The term
structure is flat, with all risk-free interest rates being 8%
(cont. comp.).
What is the price of a European call option on the same stock
that expires in six months and has a strike price of $100?
Explain in detail the arbitrage...

For a
European put option on an index, the index level is 1,000, the
strike price is 1050, the time to maturity is six months, the
risk-free rate is 4% per annum, and the dividend yield on the index
is 2% per annum. How low can the option price be without there
being an arbitrage opportunity?

The price of a European put option on a stock with a strike
price of $30.00 is $6.80. The stock price is $28.00, the
continuously compounded risk-free rate (all maturities) is 4% and
the time to maturity is one year. A dividend of $2.00 is expected
in three months. What is the price of a one-year European call
option on the stock with a strike price of $30.00?
Select one:
a. $7.22
b. $4.00
c. $6.98
d. $4.74

A ten-month European put option on a dividend-paying stock is
currently selling for $4. The stock
price is $40, the strike price is $43, and the risk-free interest
rate is 6% per annum. The stock is expected
to pay a dividend of $2 two months later and another dividend of $2
eight months later. Explain the
arbitrage opportunities available to the arbitrageur by
demonstrating what would happen under
different scenarios.

What is the price of a European put option on a
non-dividend-paying stock when the stock price is $70, the strike
price is $75, the risk-free interest rate is 10% per annum, the
volatility is 25% per annum, and the time to maturity is six
months?

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 5 minutes ago

asked 6 minutes ago

asked 9 minutes ago

asked 9 minutes ago

asked 14 minutes ago

asked 14 minutes ago

asked 15 minutes ago

asked 16 minutes ago

asked 17 minutes ago

asked 17 minutes ago

asked 17 minutes ago

asked 18 minutes ago