Assume no dividends. The Lower Bound of European Put Option Price (Kent-So) is 150. The actual European Put Option Price (p) is 120. Which of the following is correct?
(A) There is an arbitrage opportunity with this put option
(B) This put option is correctly priced based on no arbitrage
(C) There is no arbitrage opportunity with this put option
(D) All of the above
Answer:
If volatility (0) of the underlying stock return increases:
(A) Both Put option price and Call option price increase
(B) Call option price decreases and Put option price increases
(C) Put option price decreases and Call option price increases
(D) Both Put option price and Call option price decrease
Answer:
