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

Relationship b/w bond''s market price and yield to maturity, What is the re... What is the relationship between a bond's market price and its promised yield to maturity?  Explain. A bond's market price reckon on its yield to maturity (YTM).  When a bond h

Financial management, using the operating cycle and any other financial man... using the operating cycle and any other financial management knowledge,discuss the applicability of such cycle to poultry business in Uganda(consider broilers)

Compute the expected return and standard deviation, Question: Consider ... Question: Consider the following information:   Stock A Stock B Beta 0.8 1.4 Share price, $

Financial Management, Hello? Hello?

Organizational cost drivers, Organizational Cost Drivers It is the cost... Organizational Cost Drivers It is the cost consequences that result from managerial choices concerning the company of activities as well as the involvement of persons inside an

Monthly cash flow, I need to prepare a monthly cash flow for a company with... I need to prepare a monthly cash flow for a company with the given information, and need to comment on the current performance and the future sales increment. Then we need to find

Calculate super normal profit, The economic analysis is done for Schlumberg... The economic analysis is done for Schlumberger, oilfield service company. They are # 1 in terms of market caps, revenue and employees globally. If any references are used / outside

Cost of equity share capital, Cost of Equity Share Capital (ke) The co... Cost of Equity Share Capital (ke) The cost of equity capital is the 'maximum rate of return that the Co. must earn on equity financed portion of its investments in order to go

None, Reacher Technology has consulted with investment bankers and determin... Reacher Technology has consulted with investment bankers and determined the intere Reacher Technology has consulted with investment bankers and determined the interest rate it woul

Explain risk aversion, What is risk aversion? If common stockholders are ri... What is risk aversion? If common stockholders are risk averse, how do you explain the fact that they often invest in very risky companies? Risk aversion is the trend to avoid add