What would be the final arbitrage amount

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Reference no: EM131360801

You have the following information: S=52, X=50, T=1, r=0, C=5, P=5

Evaluating the situation from a Put-Call Parity framework, what steps would you take to implement an arbitrage strategy?

Sell Call, Buy Put, Short Stock, Invest remainder

Sell Call, Buy Put, Buy Stock, Borrow remainder

Buy Call, Sell Put, Buy Stock, Borrow remainder

Buy Call, Sell Put, Short Stock, Invest remainder

Buy Call, Sell Put, Short Stock, Borrow remainder

Using the information and the solution from the previous question, what would be the final arbitrage amount? (approximately)

If S>X or S<X then the arbitrage will be $2

If S>X then $7, if S<X then $5

If S>X or S<X then the arbitrage will be $3

If S>X then $3, if S<X then $6

If S>X or S<X then the arbitrage will be $5

Please provide me with step by step answer.

Reference no: EM131360801

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