Asked by Hoala Chock on Jun 19, 2024
Verified
C1 = 0 if (S1- E) < 0 identifies the value of a call option at expiration.
Call Option
A finance-related agreement that allows the buyer the choice, yet not the duty, to purchase an equity, debt instrument, commodity, or another type of asset at an agreed-upon price within a set period.
Expiration
In finance, expiration refers to the date on which a derivative contract (such as options or futures) ceases to exist and settles between the contracting parties.
- Comprehend the variables impacting the value of options at the time of expiration.
Verified Answer
EK
Emmet Keeffe IVJun 20, 2024
Final Answer :
True
Explanation :
The expression given is a simplified representation of the intrinsic value calculation for a call option at expiration, which states that if the stock price (S) minus the strike price (E) is less than 0, the value of the call option is 0, because call options are not exercised if the stock price is below the strike price at expiration.
Learning Objectives
- Comprehend the variables impacting the value of options at the time of expiration.
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