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Question: options amp derivatives can someone explain why the loan 980...

Question details

Options & Derivatives: Can someone explain why the loan ($980 * 1.02 = $1000) is included in the payoff but not cost?

Question -

3.1 Suppose that you buy the S&R index for $1000, buy a 1000-strike put, and borrow $980.39. Perform a payoff and profit calc

Table 3.1 -

TABLE 3.I Payoff and profit at expiration from purchasing the S&R index and a 1000-strike put option. Payoff is the sum of th

Solution -

Question 3.1 This question is a direct application of the Put-Call-Parity [equation (3.1)] of the textbook. Mimicking Table 3

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