Properties of Stock Options
Properties of Stock Options
Properties of Stock Options
Chapter 9
Variable c p C P
S0 + – + –
K – +? – +
T ? + +
+ + + +
r + – + –
D – + – +
Options, Futures, and Other Derivatives
7th Edition, Copyright © John C. Hull
2008 3
American vs European Options
Suppose that
p=1 S0 = 37
T = 0.5 r =5%
K = 40 D =0
Is there an arbitrage
opportunity?
p max(Ke -rT–S0, 0)
rT
c S 0 D Ke
rT
p D Ke S0