hard · Quantitative Finance derivatives
Consider a European call and put on a non-dividend-paying stock with S_0 = $60, K = $58, T = 0.5, and r = 4%. If the call trades at $5.50 and the put trades at $2.00, identify the mispricing relative to Put-Call Parity.
- The call-minus-put combination is overpriced by $0.351.
- The put-minus-call combination is overpriced by $0.351.
- The market is arbitrage-free.
- The call is underpriced by $2.00.
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