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4

Note that \begin{align*} (K-S_T)^+ \ge K-S_T. \end{align*} Then \begin{align*} p &\equiv E\Big(e^{-rT} (K-S_T)^+ \Big)\\ &\ge E\Big(e^{-rT} (K-S_T) \Big)\\ &=K\, e^{-rT} - S_0\\ &= 670 \times e^{-0.05 \times 55/365} - 563.48\\ &=102.49. \end{align*} However, the option price is 101.375, which is smaller. This is the reason that you have ...


1

A possible reason may be your computation of maturity period. Exchange compute the maturity in minute till expiry and then divide it by total trading minute in a year to arrive at maturity. An another possible reason may be your choice of risk free interest rate. There are various proxy for risk free interest rate like Treasury rate and LIBOR of different ...



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