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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 355
P R O B L E M 1 4 . 1 0
On March 5, SBI stock is selling at INR 2,350. Call and put options are available with an exercise price of INR 2,400
and the exercise date of April 28. e call is selling at INR 90, and the put is selling at INR 108.26. e risk-free rate
is 9%. Show how a borrowed position at the risk-free rate can be created using these available securities.
Solution to Problem 14.10
A position in borrowing at the risk-free rate can be replicated by the following strategy:
Write a put, short sell a stock, and buy a call
If we follow this strategy, the cash ow on March 5 will be:
Buy a put at the put price P = –INR ...
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Publisher Resources

ISBN: 9781299447547Publisher Website