Derivatives Flashcards
1
Q
Options contract
A
A contract that gives the buyer the right but not the obligation to buy (call) or sell (put) a security or underlying asset at an agreed-upon price (strike price) on or before a specified date (exercise date
Call options = buyer wants stock price to go up
Put options= buyer wants stock price to go down
2
Q
Option valuation
A
Composed of two parts
Intrinsic value - the difference between the market value and the strike price of the given option
Time value - depends on the set of factors that are used to determine the discounted expected future value of that difference at expiration
3
Q
Value of an option
A
Time value + intrinsic value
4
Q
Hedge accounting
A
Make card
5
Q
Time value
A
Make a card
6
Q
Intrinsic value
A
Make a card
