B.2 Forwards And Options Flashcards
0
Q
What is the profit on a written put option?
A
- Max[0, Strike Price-Spot Price] + FV Option Premium
- Max[0, K-S] + FV Option Premium
1
Q
Def: Call Option
A
Contract that gives the BUYER the right to BUY an asset at the STRIKE PRICE.
2
Q
What asset can be used to shift a payoff diagram without affecting the corresponding profit diagram?
A
Zero-Coupon bond
3
Q
Options are (more/less) expensive when the underlying asset is riskier.
A
More expensive
4
Q
As the deductible gets higher, options are (more/less) expensive.
A
Less expensive
