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02-01-2023
Business

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You are looking at option prices on calls and puts and noticed that biogen idec (biib) is currently selling at $319. 55. you look up the price of a call and a put with a strike price of $300 and maturing in 6 months. the price of the call is $40. 80 and the put is $19. 25. assume biib does not pay a dividend. you also noticed the risk free rate is 2% per annum with continuous compounding for the next six months. if there is a mispricing, generate an arbitrage thatwill allow you to exploit this mispricingotherwise show that no arbitrage can be made. what do you long and what do you short

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