Put-Call Parity Asserts That a Combination of a Long Position

question 31

Essay

Put-call parity asserts that a combination of a long position in the stock and the put produces the same return as a comparable position in a call and a risk-free bond. If not, at least one market is in disequilibrium. The resulting arbitrage alters the securities' prices until the value of the stock plus the put equals the prices of the call and the bond. The successful use of arbitrage assumes the investor of a profit no matter what happens to the price of the stock.

Put-call parity also asserts that if an arbitrage opportunity does not exist, then a combination of the stock and the put produces the same return as the comparable position in the call and the risk-free bond. Currently, the price of a stock is $70 while the price of a call option at $70 is $6; the price of the put option at $70 is $2, and the price of a discounted bond is $66. Verify that a long position in the stock and the put produces the same performance as a long position in the call and the bond for the following prices of the stock: $60, 65, 70, 75, and 80.

Evaluate the significance of ethics in business strategies and corporate social responsibility.

Discuss the potential conflicts and harmonies between ethical principles and legal requirements.

Critique ethical decisions in case scenarios based on underlying ethical theories.

Explain the concept of enlightened corporate self-interest and its impacts on corporate and social welfare.

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Definitions:

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A sitting position in medical contexts where the head of the bed is raised to 60-90 degrees to aid in breathing and relieve pressure on the chest.

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A medical procedure involving the insertion of a needle into the lower part of the spinal canal to collect cerebrospinal fluid for diagnostic testing.

Computed Tomography

A medical imaging technique that combines multiple X-ray measurements from different angles to create detailed cross-sectional images of areas inside the body.

Intracranial Pressure

The pressure within the skull affecting the brain, influenced by blood, cerebrospinal fluid, and brain tissue; changes can indicate significant conditions.