Lecture 8 and Reading Flashcards
1
Q
What is a Call Option?
A
An option to buy an asset at a fixed price in a specific fixed price in specific future time
2
Q
What is a Put option?
A
an option to sell an asset at a fixed price in a specific future time (will not exercise unless the payoff is positive)
3
Q
European option
A
exercised only at the end of it’s life
4
Q
American option
A
exercised at any time up to the expiration
5
Q
A European option allows the buyer to:
A
sell the option in the open market prior to expiration and buy the underlying asset at the exercise price on the expiration date
