Revision as of 17:58, 14 May 2023 by Admin (Created page with "You are given: #The current price to buy one share of XYZ stock is 500. #The stock does not pay dividends. #The continuously compounded risk-free interest rate is 6%. #A Euro...")
ABy Admin
May 14'23
Exercise
You are given:
- The current price to buy one share of XYZ stock is 500.
- The stock does not pay dividends.
- The continuously compounded risk-free interest rate is 6%.
- A European call option on one share of XYZ stock with a strike price of K that expires in one year costs 66.59.
- A European put option on one share of XYZ stock with a strike price of K that expires in one year costs 18.64.
Using put-call parity, calculate the strike price, K.
- 449
- 452
- 480
- 559
- 582
Copyright 2023. The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.
ABy Admin
May 14'23
Key: C
66.59 – 18.64 = 500 – Kexp(–0.06) and so K = (500 – 66.59 + 18.64)/exp(–0.06) = 480.
Copyright 2023. The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.