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textbook problem p.414

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Options and contingent claims

p.414
5. A 90-day European call option on a share of stock of Toshiro Corporation is currently trading at 2,000 yen whereas the current price of the share itself is 2,400 yen. Ninety-day zero-coupon securities issued by the government of Japan are selling for 9,855 yen per 10,000 yen face value. Infer the price of a 90-day European put option on this stock if both the call and put have a common exercise price of 500 yen.

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Solution Summary

The expert examines a 90-day European call option on a share of stocks. This posting provides the solution to the student's textbook problem.

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SOLUTION:

Using the expression for put-call parity, P = -S + E/(1+r)^T + C

S is the share price, P is the price of ...

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