Call price = $1.45 Market price of the call = $2.30 Therefore, the call is overpriced. Q1. Execute an arbitrage strategy for the period of 16/3/2022 – 14/4/2022. In other words, open all relevant positions on the 16th of March, and close out all positions on the 14th April 2022. (screenshot attached) a. Document details of all relevant transaction at the beginning as well as the end of the relevant period. b. Explain the arbitrage strategy c. Evaluate the arbitrage results
Call price = $1.45 Market price of the call = $2.30 Therefore, the call is overpriced. Q1. Execute an arbitrage strategy for the period of 16/3/2022 – 14/4/2022. In other words, open all relevant positions on the 16th of March, and close out all positions on the 14th April 2022. (screenshot attached) a. Document details of all relevant transaction at the beginning as well as the end of the relevant period. b. Explain the arbitrage strategy c. Evaluate the arbitrage results
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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Question
Call price = $1.45
Market price of the call = $2.30
Therefore, the call is overpriced.
Q1. Execute an arbitrage strategy for the period of 16/3/2022 – 14/4/2022. In other words, open all relevant positions on the 16th of March, and close out all positions on the 14th April 2022. (screenshot attached)
a. Document details of all relevant transaction at the beginning as well as the end of the relevant period.
b. Explain the arbitrage strategy
c. Evaluate the arbitrage results
Transcribed Image Text:Name
CALL AFMG MAR23 18
CALL AFMG MAR23 18 - OPT STRIKE PRICE
PUT AFMG MAR23 18
PUT AFMG MAR23 18 - OPT STRIKE PRICE
16/3/22 14/4/22
2.30
4.74
18.00
18.00
3.88
2.08
18.00
18.00
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