Question

Problem setup questions to follow
Assume that the price of a stock follows a geometric Brownian motion with a volatility of 10% and its expected return is 5%. The risk-free rate is 2%. The price is currently $20 and two European options written on this stock are currently traded.

The first is a put with a strike price of $22 and a maturity of six months (the Greeks are delta = -0.8792, r = 0.1421, v = 2.8419).

The second is a call with a strike price of $20 and a maturity of six months (the Greeks are delta = 0.5702, r = 0.2777, v = 5.5544).

Problem setup questions to follow
Assume that the price of a stock follows a geometric Brownian motion with a volatility of 10% and its expected return is 5%. The risk-free rate is 2%. The price is currently $20 and two European options written on this stock are currently traded.

The first is a put with a strike price of $22 and a maturity of six months (the Greeks are delta = -0.8792, r = 0.1421, v = 2.8419).

The second is a call with a strike price of $20 and a maturity of six months (the Greeks are delta = 0.5702, r = 0.2777, v = 5.5544).

@Finance