Level 1 CFA® Exam:
Put-Call Parity – Arbitrage

Last updated: January 09, 2023

CFA Exam: How Do We Do Arbitrage?

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Example 1 (put-call parity arbitrage)

There are two identical european options: call and put with the exercise price equal to USD 105 and one year until expiration. The risk-free interest rate is equal to 5%, the current stock price is USD 104 and the put premium amounts to USD 3.

Compute the arbitrage profit (if it exists) assuming that the call option premium is equal to USD 6.

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