Find an upper bound of the price of the call option

Assignment Help Finance Basics

Reference no: EM132179306

Question - Given current price of European call options with three different strike prices

K	80	100	110	140
c(K)	14.0		5.0	2.6

a. Find an upper bound of the price of the call option with strike 100, c(100), by using the information of c (80) and c(110).

b. Find a lower bound of c(100) by using the information of c(110) and c(140).

c. If the market price of c(100) is 9.0, can you find an arbitrage opportunity? If yes, demonstrate your strategy.

d. If the market price of c (100) is 5.3, can you find an arbitrage opportunity? If yes, demonstrate your strategy.

Reference no: EM132179306

Questions Cloud

Find the number of full monthly deposits : If her monthly deposits are made starting immediately and her savings is making 2% (12), find the number of full monthly deposits and the last partial deposit

Necessarily have all of their desired features : When is it "better" to give customers everything they want in a product as a premium price (higher than their average price) vs. giving them a lower priced

Coolest monkey in the jungle : Monkeys are very cute and you might even call your son or daughter, niece or nephew a little monkey.

What goals motivate an alcohol tax : Both a payroll tax and an excise tax on alcohol raise revenue and, respectively, shrink the markets for labor and alcohol. Although both have some functions.

Find an upper bound of the price of the call option : Find an upper bound of the price of the call option with strike 100, c(100), by using the information of c (80) and c(110)

Evaluate for tax concerns-potential liability and governance : Evaluate for tax concerns, potential liability, governance, continuity, raising funds, and maximizing opportunities.

Discuss about the demand for cigarettes : The demand for cigarettes, which create negative externalities through secondhand smoke, is often relatively inelastic. That is, when the price of cigarettes.

Communication is inevitable-irreversible and unrepeatable : Explain what is meant by the principle: "communication is inevitable, irreversible and unrepeatable."

How much they walk on the sidewalk : A local government is considering ways to raise taxes to pay for making sidewalks. One prominent citizen suggests taxing people based on how much.

User Account

All Pages