I wrote a little page which checks Boundary Conditions of Stock Options. For example, put-call parity is S-c+p-X*exp(-rT), where S is the stock price, c and p are call and put option values, X is a strike price, r is risk free rate, T is time to maturity. Obviously, time to maturity should be the same for both options. You can consult Hull's "Options, Futures and Other derivatives" book for a list of boundary conditions, it's in chapter 8 of 5th edition.

So, if you enter your options prices on my page, it will check if any boundary conditions are violated. In that case there's arbitrage opportunity present.

## Tuesday, February 13, 2007

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