Capital Markets Arbitrage question?
Consider the following market quotes:? The current price of a stock is S0 = $ 100;? There Is a European call option struck at X = 100 in 3 months Maturing Which is trading for $ 0. 7, and? There Is a European put option struck at X = 100 in 3 months Maturing Which is trading for $ 2? The Risk free rate is 8% [quarterly compounding]. You do not know what values ??the stock at expiration dog take. Assume That You are not allowed to sell short [to write] But You Can call options short Any other traded asset. Detect an Opportunity and construct the arbitrage strategy to exploit this trading Opportunity.