4.23.2005

Q&A: What will be the value of his investment on the exercise date if...

...an investor buys one share of stock, a put option on the stock and simultaneously sells a call option on the stock with the same exercise price?

A: stock_price + Max{0, excercise_price - stock_price} - Max{0, stock_price - exercise_price}, which results in two scenarios

  • S + 0 - S + X = X, Or
  • S + X - S + 0 = X

Category: C++ Quant > Derivatives > Options

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