identify, analyze and discuss the following characteristics of an American put option: maximum value, intrinsic value, time value, lower bound, and payoff at expiration.     ii) analyze and discuss the following factors on an American put option: time to expiration, exercise price, interest rate, volatility, and dividends.   iii) identify, analyze, and discuss the following characteristics of a European call option: maximum value, intrinsic value, time value, lower bound, and payoff at expiration.   iv) analyze and discuss the following factors on a European call option: time to expiration, exercise price, interest rate,

For a share S the market quotes put options with a given strike K and expiration T in both european and american styles. Use an arbitrage argument to construct a formula relating the price of the european put option to the price of the american put option with the same strike and expiration.

Below is a chart with profit/loss on the vertical axis, and the $/£ exchange rate on the horizontal axis.  The solid line shows the profit/loss schedule for a:     Question 8 options:   put option in isolation (e.g. used for speculating that the pound will depreciate)   None of the above   covered call option (a call option is used as a hedge)   covered put option (a put option is used as a hedge)

h) discuss the relationship between the prices of puts, calls, and forward/futures contracts on the same underlying asset using the put-call-forward/futures parity.      i) discuss the boundary conditions on the prices of American and European call option contracts on futures.       j) explain and discuss the use of interest rate parity in pricing foreign currency forwards and futures.      k) describe how spot prices are determined using the cost-of-carry model.

Options have a unique set of terminology. Definethe following terms:(3) Strike price or exercise price

Which one of the following statements is true? Multiple Choice O O O O A call with a strike price of $25 and a stock price of $23 has positive intrinsic value. A European style option is more valuable than an American style option. An American style out-of-the-money call option can have a positive value. A $40 put option has more intrinsic value than a $50 put option on the same underlying asset. The time value of an option is equal to the intrinsic value minus the option premium.

Consider a call and a put options with the same strike price and time to expiry. Given that the strike price is exactly equals to the forward price, then:   A. Put and call have same premium   B. The premium of the put is equal to the forward price   C. The premium of the put is equal to the premium of the call plus the present value of the strike   D. The premium of the call is equal to the forward price

Define American option

Which of the following statements about European option contracts is TRUE? a. Typically American options are cheaper than otherwise similar European options due to the uncertainty regarding the date of exercise. b. One can synthesise a long forward position in the underlying by being long a call and short a put c. A long call position and a short put position both involve buying the underlying and so are equivalent d. The price of an option can be obtained by computing the true probabilities of each state of nature, working out the expected option payoff across those states and then discounting back to the present.

a)analyze and discuss the following factors on a European call option: time to expiration, exercise price, interest rate, volatility, and dividends.  b) identify, analyze, and discuss the following characteristics of a European put option: maximum value, intrinsic value, time value, lower bound, and payoff at expiration.  c) analyze and discuss the following factors on a European put option: time to expiration, exercise price, interest rate, volatility, and dividends.  d) discuss the relationship between American and European option prices.  e) derive the put-call parity and discuss its implications.    f) discuss the characteristics of a currency option.