1. Business
  2. Finance
  3. 7 an investor holds a european call with strike ke...

Question: 7 an investor holds a european call with strike ke...

Question details

7. An investor holds a European call with strike Ke and maturity T on a non-dividend- paying asset whose current price is So. Suppose the investor can write a put with any strike strike price Kp, write a forward with any delivery price Kf, and can borrow any amount B at the risk-free rate if B is negative this is a loan). What are the conditions on Kp, Kf, and B that make this combination of positions a constructive sale (i.e. that have the same effect as selling the call)?

Solution by an expert tutor
Blurred Solution
This question has been solved
Subscribe to see this solution