Derivatives and options
6 important questions on Derivatives and options
What is a derivative?
What is a future/forward agreement?
What factors influence the value of options?
2. The amount of time till the maturity date
3. Price of the underlying asset (higher price = higher value)
4. Volatility of share price (higher volatility = higher chance that share price is different at maturity date)
5. Interest - (higher interest = more valuable to buy share at predetermined price)
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What is the lower bound of a call price equal too?
What is the put-call parity?
price underlying asset + priceput = pricecall + PVexerciseprice
For what reasons may the call-put parity not work?
2. Numbers can be rounded during the calculation
3. Transaction cost can change the actual price form the calculated values
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