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Business, 06.04.2020 19:04 destiniout04231

A European call and a european put on a stock have the same strike price and time to maturity. At 10:00 am on a certain day, the price of the call is $3 and the price of the put is $4 . At 10:01 am news reaches the market that has no effect on the stock price or interest rates, but increases volatilities. As a result the price of the call changes to $3.5?

Which of the following is correct and show your calculations:

a. The put price increases to 4.5
b. The put price decreases to 3.5
c. The put price increases to 5.5
d. it is possible that there is no effect on the put price

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Answers: 1

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A European call and a european put on a stock have the same strike price and time to maturity. At 10...
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