Which One of the Following Represents an Arbitrage Opportunity

question 10

Multiple Choice

Which one of the following represents an arbitrage opportunity?

• A) stock price of $18 and strike price of $20
• B) call price of $0.40 and put price of $0.40
• C) PCP-implied put price of $0.30 and call price of $0.28
• D) PCP-implied put price of $0.30 and put market price of $0.31
• E) PCP-implied call price of $0.20 and a put market price of $0.22

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Definitions:

Physical Resources

Tangible assets used in the production or delivery of goods and services, such as machinery, buildings, and raw materials.

Scarcity

The fundamental economic problem of having seemingly unlimited human wants and needs in a world of limited resources.

Opportunity Cost

Renouncing the possibility of gains from different alternatives by making a single choice.

Human Desire

The intrinsic motivation or want for specific outcomes, experiences, or material possessions.