In the following set of Europe

timer Asked: Oct 30th, 2015

Question description

In the following set of European option prices, assume 1‐month call and put price at strike 108 are correct. Prevailing short‐term interest rate is 2% per year. There are arbitrage opportunities in the rest of the strikes. Find all the available arbitrage opportunities. 

Call Price .71   .29     .14

Strike      106.5  108   110

Put Price 0.23   1.70  4.39 

As an independent trader without any affiliation with a big financial institution, which of the arbitrage opportunities might be difficult for you to exploit?

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