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Explain the call-put parity relation and how it is justified

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Q1. Explain the call-put parity relation and how it is justified.

Q2. Describe the five variables (Assets price, Strick price or Exercise Price, Risk- Free- Rate, Time to Expiration, Volatility) that Black-Scholes-Merton Formula uses to calculate the price of call and put options.

Q3. Explain how the change in these variables (Assets price, Strick price or Exercise Price, Risk- Free- Rate, Time to Expiration, Volatility) affects the price of the option.

Q4. Explain how these variables (Assets price, Strick price or Exercise Price, Risk- Free- Rate, Time to Expiration, Volatility) are grouped to show the put-call parity relationship and suggest the condition in which there is an arbitrage opportunity.

Reference no: EM133130453

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