Adam Michaels thinks that the price of Stryker Corp. stock, currently at $158.23, will increase in the next 6 months, so he purchases a European call option on Stryker stock expiring in six months. The call option has a strike price of $125 and is selling for $38.05. The interest rate is 3% APR, continuous compounding.
• One month into the contract, is there any current credit risk? If yes, who bears it? How much is the current credit risk?
• One month into the contract, is there any potential credit risk? If yes, who bears it? How much is the potential credit risk?