A stock that does not pay dividend is trading at $40. A European call option with strike price of $30 and maturing in one year is trading at $6. An American call option with strike price of $30 and...


A stock that does not pay dividend is trading<br>at $40. A European call option with strike<br>price of $30 and maturing in one year is<br>trading at $6. An American call option with<br>strike price of $30 and maturing in one year is<br>trading at $16. You can borrow or lend money<br>at any time at risk-free rate of 5% per annum<br>with continuous compounding. Devise an<br>arbitrage strategy<br>

Extracted text: A stock that does not pay dividend is trading at $40. A European call option with strike price of $30 and maturing in one year is trading at $6. An American call option with strike price of $30 and maturing in one year is trading at $16. You can borrow or lend money at any time at risk-free rate of 5% per annum with continuous compounding. Devise an arbitrage strategy

Jun 01, 2022
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