Answered: Assume an interest rate of zero. A Call…

Assume an interest rate of zero. A Call option and a Put option with the same exercise price, X = 100p are priced at 9p for the Call and 4p for the Put. What is the price of the synthetic share?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Assume an interest rate of zero. A Call option and a Put option with the same exercise price, X = 100p are priced at 9p for the Call and 4p for the Put. What is the price of the synthetic share?

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Similar questions

Consider a call option whose maturity date is T and strike price is K. At any time t < T, is it always the case that the call option's price must be greater than or equal to max(St – K,0), where St is the stock price at t? (Your answer cannot be more than 30 words. Answers with more than 30 words will not be graded.)
According to the put-call parity theorem, the payoffs associated with ownership of a call option can be replicated by buying the underlying stock, borrowing the present value of the exercise price, and buying a put on the same underlying stock and with the same exercise price shorting the underlying stock, lending the present value of the exercise price, and buying a put on the same underlying stock and with the same exercise price shorting the underlying stock, borrowing the present value of the exercise price, and writing a put on the same underlying stock and with the same exercise price buying the underlying stock, borrowing the present value of the exercise price; and writing a put on the same underlying stock and with the same exercise price
One way to model an option with dividends in the binomial framework is for the stock price minus the present value of the dividends to grow by the up and down factors. True or False?
Consider a forward contract on a stock that pays dividends at specific times ti, where 0 < t1 < t2 < ... < tn < T. Suppose that the dividend is a fixed amount: Di at fixed times ti. Show that in this case, the forward contract price is given by
Consider a call and a put options with the same strike price and time to expiry. Given that the strike price is exactly equals to the forward price, then: A. Put and call have same premium B. The premium of the put is equal to the forward price C. The premium of the put is equal to the premium of the call plus the present value of the strike D. The premium of the call is equal to the forward price
Assume a security follows a geometric Brownian motion with volatility parameter = 0.2. Assume the initial price of the security is 21 and the interest rate is 0. It is known that the price of a down-and-in barrier option and a down-and-out barrier option with strike price 19 and expiration 30 days have equal risk-neutral prices. Compute this common risk-neutral price.
please give me answer
What does it mean to assert that the delta of a call option is 0.7? How can a short position in 1,000 options be made delta neutral when the delta of each option is 0.7?
The price S(u), 0 ≤ u ≤ t, of the share is driven by a geometric Brownian motion: S(u) = Seμu+σW(u).A proportional dividend on this share is paid continuously at rate q > 0 and is reinvested in the share. The continuously compounded interest rate is r. Compute the no-arbitrage price of a derivative with expiration time t and payoff function R(t) = [S(t/3)S(2t/3)S(t)]1/3 .
The price level you choose for price protection on a call option is referred to as: A. The strike price B. The option premium C. The time value D. The intrinsic value
A call option will cost more today if I. the underlying asset's value in today's market is lower. II. its exercise price is higher. III. the stock's current value goes up. IV. its strike price goes down.
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