
410 Derivatives and Risk Management
C A S E S T U D Y
Akhil, the manager of Bharat Funds, has used the put–call arbitrage
to provide additional gains to the shareholders of the fund. Now,
he is not sure whether the options themselves are fairly priced. He
would like to earn pro ts by identifying the underpriced and over-
priced options so that he can make additional gains. He has identi-
ed the Ni y index, Tata Steel, and State Bank of India options for
this purpose.
On September 1, the Ni y index is at 5,080. Since the Ni y
index has been trading in the range of 4,900 to 5,200 over the past
three years, he assumes that ...