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What is the price of the option if it is an American call

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Question - Consider an option on a non-dividend-paying stock when the stock price is $30, the strike price is $29, the interest rate is 5% per annum with continuous compounding, the volatility is 20%, and the time to maturity is 3 months. An option is for a share of the underlying stock.

(a) What is the price of the option if it is a European call?

(b) What is the delta neutral position if 30 European calls are written?

(c) What is the price of the option if it is an American call?

(d) If put-call parity does not hold, what is the arbitrage strategy for a European put price at $2?

Reference no: EM132961640

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