Define American option

Q: What is European option?

A: An option is defined as contracts that give the proprietor the option to purchase or sell a asset at…

Q: What is the purchasing power exchange rate?

A: Purchasing power exchange rate is the rate at which one currency is converted into another currency…

Q: Use the put-call parity to derive the relationship between the theta of a European call option and…

A: In asset pricing, volatility of the asset are described by Delta, Gamma, Vega and Theta. Theta is…

Q: What is foreign exchange FX risk?

A: Foreign exchange risk: It alludes to the misfortunes, due to currency or money changes, that a…

Q: Consider the Black-Scholes model. In class, we derived the formula for the price of the European…

A: A call option entitles the holder to purchase a stock, whereas a put option entitles the holder to…

Q: What is Lump-sum cash-value option?

A: The option is the contract with two or more options for the financial instrument. The lump-sum cash…

Q: Define the term exchange rate?

A: There are two types of exchange rates: floating and fixed. The floating exchange rate is determined…

Q: What is growth option?

A: Mutual funds have two types of schemes. Growth option and dividend option. Mutual funds having…

Q: Explain the following terms related to “Options”; -          Call option versus Put Option -…

A: Note: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question…

Q: Define Foreign exchange risk.

A: The term foreign exchange risk is defined as, the risk of an ominous variation in the settlement…

Q: What is the primary distinction between exchange-listed and over-the-counter options? Which option…

A: There are various uncertain future factors which can create the risk in coming time, to avoid or…

Q: Define a call option’s exercise value. Why is the market price of acall option always above its…

A: Answer: A call option is basically a deal that gives the option buyer the right to purchase…

Q: How have international market allocated capitale and risk

A: Solution International Market An international market is outlined geographically as a market outside…

Q: An option that gives the option buyer the right to buy the commodity or financial instrument…

A: Option contracts can be of two types. One is call option contract and other is put option contract.…

Q: what is the lower/upper bounds for prices of american call/put options with divdend? is it…

A: An American option contract that permits holders to exercise their option rights at any moment up to…

Q: What is an alternative trading system (ATS)?

A: Alternative trading systems are generally helpful for people like investors & professional…

Q: The American put option price is always equal to the European put option price True False

A:

Q: The price at which an option can be exercised is called the:   Question 22 options:…

A: Options are the financial instrument available in the derivative market where right instead of…

Q: Explain Price Return Swap?

A: A derivative contract which enables two parties to exchange financial instruments, cash flows,…

Q: An option that gives the option buyer the right to sell the commodity or financial instrument…

A: Options are the instruments that gives the buyer or seller the right to buy or sell the underlying…

Q: Explain the random walk model for exchange rate forecasting. Can it be consistent with technical…

A: The Random Walk Model suggests that the movement in the prices of the stocks is unpredictable and if…

Q: What is exchange rate risk?

A: Exchange rate risk It is a chance of occurrence of loss in the investment value because of uncertain…

Q: How are American options different from the European options? Which one of them is likely to have a…

A: Options can be defined as a course of action taken by a holder as a right to either buy or sell an…

Q: What is the difference between a spot rate anda forward exchange rate?

A: There are two types of currency exchange rates available namely forward exchange rate & spot…

Q: ack-Scholes-Merton options pricing model well suited to pricing an American call option on a…

A: Introduction : Some of the greatest fundamental constructs in current finance theories seems to be…

Q: What is the purpose of the Black–Scholes Option Pricing Model?

A: Black-Scholes is a pricing model used to determine the fair price or theoretical value for a call or…

Q: What is Currency options?

A: In the given question we need to define what is currency options.

Q: What’s the difference between spot markets and futures markets?

A: Introduction: Spot market can be defined as a over the counter market which involves trading of…

Q: What are advantages of futures options over spot options?

A: Futures: The contract to buy or sell assets at predefined prices but will be paid and delivered…

Q: State and prove the Put-Call Parity Theorem that gives the relation between a European Call and a…

A: Put-Call Parity: A concept known as "put-call parity" governs the connection between the prices of…

Q: Explain why maturity (T) has an indeterminate effect on the prices of European put and call options

A: European options define the timeframe when holders of an options contract may exercise their…