European call options on the stock xyz with an exercise, Finance Basics

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European call options on the stock xyz with an exercise

European call options on the stock XYZ with an exercise price of $35 and maturity of6-months are currently selling for $4. XYZ does not pay any dividends. European putoptions with the same maturity and exercise price are selling for 67¢. You wouldlike to short sale the XYZ stock, but short sales are strictly illegal. How wouldyou replicate the payoff in six-months' time from short-selling 5 shares of XYZstock today. Assume that the risk-free rate is 20%

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Finance Basics: European call options on the stock xyz with an exercise

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Finance Basics: European call options on the stock xyz with an exercise

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