Your mission Jim....

money tree said:

A + B = C + D

risk A + risk B = total risk + return

first problem is how to get A and B to equal zero. The second problem is how to avoid a -D when C is zero.

Both have solutions

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ducati916 said:

Just been having a nosy through the derivatives forum, when I chanced upon this little nugget. The answer, is of course, arbitrage which by definition is risk free and self funding. The formula is as follows;

S + P = C + X/(1 + Rf)*

S = Stock
P = Put
C = Call
X = Strike
Rf = Risk Free Rate
* = Time [as an exponent]

jog on
d998

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