Management and Organizational Studies 3311A/B Chapter Notes - Chapter 23: Operating Lease, Opportunity Cost, Finance Lease
23 Feb 2017
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Chapter 23 : options and corporate finance: basic concepts. The intrinsic value of the calls is : the puts are out of the money. The intrinsic value of the puts is sh: the mar call and the oct put are mispriced. The call is mispriced because it is selling for less than its intrinsic value. If the option expired today, the arbitrage strategy would be to buy the call for . 80, exercise it and pay for a share of stock, and sell the stock for . The october put is mispriced because it sells for less than the july put. To take advantage of this, sell the july put for . 90 and buy the october put for . 65, for a cash inflow of sh. 25. The exposure of the short position is completely covered by the long position in the october put, with a positive cash inflow today. If the stock price at expiration is , the payoff is:
