Repeat given Problem valuing a European put option with a strike of $87. What is the put-call parity relationship between the prices of European call and put options? Show that the put and call option prices satisfy put-call parity in this case.
Problem :
Suppose that a = 0:1, b = 0:08, and σ = 0:015 in Vasicek's model, with the initial value of the short rate being 5%.
Calculate the price of a 1-year European call option on a zero-coupon bond with a principal of $100 that matures in 3 years when the strike price is $87.