Reference no: EM131360801
You have the following information: S=52, X=50, T=1, r=0, C=5, P=5
Evaluating the situation from a Put-Call Parity framework, what steps would you take to implement an arbitrage strategy?
Sell Call, Buy Put, Short Stock, Invest remainder
Sell Call, Buy Put, Buy Stock, Borrow remainder
Buy Call, Sell Put, Buy Stock, Borrow remainder
Buy Call, Sell Put, Short Stock, Invest remainder
Buy Call, Sell Put, Short Stock, Borrow remainder
Using the information and the solution from the previous question, what would be the final arbitrage amount? (approximately)
If S>X or S<X then the arbitrage will be $2
If S>X then $7, if S<X then $5
If S>X or S<X then the arbitrage will be $3
If S>X then $3, if S<X then $6
If S>X or S<X then the arbitrage will be $5
Please provide me with step by step answer.
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