What is the lower bound of a European call option on a futures contract where f0 is the futures price and X is the exercise price? Assume f0 is greater than X.
a. the difference between f0 and X
b. zero
c. the present value of the difference between f0 and X
d. the ratio of f0 to X
e. none of the above
Answer: C
If the answers is incorrect or not given, you can answer the above question in the comment box. If the answers is incorrect or not given, you can answer the above question in the comment box.