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Derivatives and Risk Management, 1st Edition
book

Derivatives and Risk Management, 1st Edition

by Sundaram Janakiramanan
May 2024
Intermediate to advanced content levelIntermediate to advanced
542 pages
27h 26m
English
Pearson India
Content preview from Derivatives and Risk Management, 1st Edition
Put–Call Parity 343
Solution to Problem 14.2
According to put–call parity,
P = C – [S
t
– (S
X
× e
–rT
)]
116.15 = C – [1,111.35 – (1,140 × e
[0.08×(87/365)]
)]
116.15 = C – (1,111.35 – 1,118.47) = C + 7.12
C = INR 116.15 – INR 7.12 = INR 109.03
14.4 Put–Call Arbitrage
e put–call parity relationship provides a theoretical relationship between the call price and the put
price on the underlying security when calls and puts are trading with the same exercise date and the same
exercise price. If this relationship does not hold, it means that the call and the put are relatively mispriced
with respect to each other. When there is mispricing, it ...
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Publisher Resources

ISBN: 9781299447547Publisher Website