MATH 534 Final: MATH 537 UMass Amherst finalF16soln
Document Summary
Instructions: show all your work for full credit, and box your answers when appropriate. Unless otherwise noted, the risk free rate is per annum with continuous compounding, there are no arbitrage opportunities, and stocks do not pay dividends. Round answers to the nearest cent (sh. 01): the spot price of facebook (fb) is . One fb share will pay a dividend in. European call on fb with strike 128 costs and a one-year european put on fb with strike 128 costs . 12 = 115. 15 < 128. 22 = 4 + 128e 0. 03 1 = c + ke rt p + s0 d = 5 + 120 10e 0. 03 . At t = 0, long position in put and stock, short position in call. At t = 1 deliver stock for strike via call if exercised against you, or via your put if call not exercised.
