Messer explains, “Of course, with the index moving down 10% in the last 12 months, the payoffs with these options could have been replicated without using options.” Szillat responds, “My understanding is that the payoff would have been the same as the call option if you had purchased 0.5697 index units and lent EUR 356.79 at the one-year interest rate.”
Messer continues, “Twelve months ago, I noted that two-year puts with a strike price of EUR750 cost EUR38.48. Using the information in Exhibit 1 and today’s index value, the binomial valuation model calculates the current price of the put as EUR80.15. It is actually trading now above that price at EUR92.”
Q. Does the put option with a strike price of EUR750 currently offer an arbitrage opportunity?
- No, because the market has bid up the price of the put.
- No, because the put is deep in the money.
- Yes.
Solution
C is correct. An arbitrage opportunity does exist. The underlying index has fallen 10% to 648, and the exercise value of the American-style index option with a strike price of EUR750 is EUR102 (750 – 648). If the option costs less than EUR102, the holder has an arbitrage opportunity by purchasing and exercising the option and simultaneously purchasing the underlying for a net positive cash flow of 10.
A is incorrect because the price of the put is only 92, which is still less than 102.
B is incorrect because the exercise value is the criteria to judge whether there is an arbitrage opportunity.
此题没搞明白什么意思，怎么题干已经告知了实际交易价格，和二项式计算的价格，一个是92 一个是80.15还问有没有套利机会，请讲下题目是什么意思？
