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shayna
August 29th 2007, 01:00 PM
Hey, need some help with this one:

you have three calls:

K=40 price of $5
K=50 price of $4
K=55 price of $3

due to mispricing one call with strike of 50 was sold. What is the minimum and maximum number of 40strike call would you have to purchase to allow for arbitrage


thanks much guys

pde
September 8th 2007, 10:56 PM
The question does not make sense. You sell one 40-strike call and then purchase the same option?