Simple Arbitrage

The easiest arbitrage opportunities in the option market exist when options violate simple pricing bounds. No option, for example, should sell for less than its exercise value.

With a call option: Value of call > Value of Underlying Asset - Strike Price

With a put option: Value of put > Strike Price - Worth of Underlying Asset

 

 

Posted Date: 7/25/2012 7:26:03 AM | Location : United States

Ask an Expert

Related Discussions:- Simple arbitrage, Assignment Help, Ask Question on Simple arbitrage, Get Answer, Expert's Help, Simple arbitrage Discussions

Write discussion on Simple arbitrage
Your posts are moderated

Write your message here..

Related Questions

Fraud and society and analytical techniques, Fraud and Society and Analytic... Fraud and Society and Analytical Techniques: Fraud and Society - The effects and financial consequences of fraud in society including the individual, older people, financial

Treasury coupon strips, Observed yield on strips can be used to const... Observed yield on strips can be used to construct an actual spot rate curve, but it is not free from drawbacks. There are some problems with this; first, the liqu

Average standard hook cycle - indirect cost, Following is the information f... Following is the information furnished by a private port for investing Rs. 10 crore in a 20 Tonne Gantry Crane. The entire funding is from a loan carrying an interest of 11%. The l

Savings, This is the part of after-tax personal income that is not spent. This is the part of after-tax personal income that is not spent.

Stock Valuation, I just purchased a stock that would pay the dividends of t... I just purchased a stock that would pay the dividends of the first four years as D1 = $0.65, D2 = $0.74, D3 = $0.79, D4 = $0.84. I also told that the dividends would grow continual

What does it mean if this value were zero, What does it mean when we say th... What does it mean when we say that the correlation coefficient for two variables is -1? What does it mean if this value were zero? What does it mean if it were +1? Correlation

Fundamentals of structured product engineering, Fundamentals of Structured ... Fundamentals of Structured Product Engineering 1. (a) Let r m denote the m month swap rate (or Libor rate). Subsequently the 3 × n month forward rate f (3 ×n )

Financial analysis project, 1. Collect three years of recent, financial... 1. Collect three years of recent, financial data (2007 - current), including the Balance Sheet, Income Statement, and Statement of Cash Flow. a. REQUIRED - paper copies o

Financial market, Financial Market: Being entrusted with different func... Financial Market: Being entrusted with different functions having macro level implications on the nation's economy, the financial system tries to fulfill its role through the f

Methods of estimating working capital, net current asset forecast method net current asset forecast method