Put, call and forward contract

Quantitative Finance Level 1

Assume the effective 6-month interest is 2%, the stock index 6-month forward price is 1020 currency unit. Suppose the premium on a 6-month stock index call is 109.20 currency unit and the premium on a put with same strike price is 60.18 currency unit. What is the strike price?

900 970 1020 1000

Winod Dhamnekar by Winod DHAMNEKAR , 55, India

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1 solution

Winod Dhamnekar
Apr 3, 2019

Present value of Forward contract is the difference in the premiums of call and put of the same strike price plus the present value of strike price. Algebraically we can state

P V ( F 0 , T ) = [ C A L L ( K , T ) − P U T ( K , T ) ] + P V ( K ) PV(F_{0,T}) = [CALL(K,T) - PUT(K,T)]+PV(K) where PV= present value, T= Expiration time,K= Strike price

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