Another expression for intrinsic value is
a. parity
b. parity value
c. exercise value
d. all of the above
e. none of the above
Answer: D
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Principles Of Option Pricing
- The effect of volatility on a call/put's price is
- A situation in which early exercise of an American put can be justified is
- Suppose that you observe a European option on a currency with an exchange rate of S0 and a foreign risk-free rate of . Which of the following inequalities correctly expresses the lower bound of the call?
- Which of the following inequalities correctly states the relationship between the difference in the prices of two European calls that differ only by exercise price
- Given a longer-lived American call and a shorter-lived American call with the same terms, the longer-lived call must always be worth
- Which of the following statements about an American call is not true?
- The difference between a Treasury bill's face value and its price is called the
- Which of the following is the lowest possible value of an American put on a stock with no dividends?
- Which of the following is the lowest possible value of an American call on a stock with no dividends?
- The time value of an option is also referred to as the
- If there are no dividends on a stock, which of the following statements is correct?
- Suppose you use put-call parity to compute a European call price from the European put price, the stock price, and the risk-free rate. You find the market price of the call to be less than the price given by put-call parity. Ignoring transaction costs, what trades should you do?
- On March 2, a Treasury bill expiring on April 20 had a bid discount of 5.80, and an ask discount of 5.86. What is the best estimate of the risk-free rate as given in the text?
- What is the lowest possible value of a European put?
- Consider a portfolio consisting of a long call with an exercise price of X, a short position in a non-dividend paying stock at an initial price of S0, and the purchase of riskless bonds with a face value of X and maturing when the call expires. What should such a portfolio be worth?
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