MGFC30H3 Lecture Notes - Arbitrage, Call Option, University Of Toronto Scarborough
Document Summary
1. the following are european call and put prices for a stock on november 9 (today): The maturity dates of the options are on fridays preceding the third saturday in each month which is 37 days from now (for the december options). You may assume that the annual risk free interest rate is 7%. November 9. a) is there a violation of the put-call parity condition. What about a put option if you owned that? (assume that volatility, exercise price and interest rates remain constant): assume you are selling microsoft put options to investors. You would like to sell or write a put option with a strike price of with 4 months to maturity. Be precise: (drawing some graphs may help you solve this problem - but still decide what securities you should buy or sell. ) Assume that risk free interest rate is 6%, and a call with a strike price of . 00 sells for . 75.
