hard · Principles of Finance risk-return-portfolio
A stock is trading at 100. A six-month European call with a strike of 100 trades at 6.50, and a six-month European put with a strike of 100 trades at 4.50. The continuously compounded risk-free rate is 4%.
According to put-call parity, what should the arbitrageur do?
- There is no arbitrage opportunity
- Sell call, sell put, buy stock, lend cash
- Sell call, buy put, buy stock, borrow cash
- Buy call, sell put, sell stock, lend cash
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