i) Differentiate between “in the money”, “out the money” and “at the money” positions in a put option. Provide the example with the illustration.
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- i) Differentiate between “in the money”, “out the money” and “at the money” positions in a put option. Provide the example with the illustration.
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- Describe the five variables (Assets price, Strick price or Exercise Price, Risk- Free- Rate, Time to Expiration, Volatility) that Black-Scholes-Merton Formula uses to calculate the price of call and put options. Explain how the change in these variables (Assets price, Strick price or Exercise Price, Risk- Free- Rate, Time to Expiration, Volatility) affects the price of the option.What is payoff to put option holder on expiry?What is put option? What is payoff to put option buyer and seller on expiry?
- What is payoff for put option buyer and seller?a. Explain the covered call options strategy b. Graphically show a covered call options strategy, including payoff. Explain why an investor mayuse this option strategy.c. Using put-call parity, explain the shape of the payoff line (in part (a) of this question). Whatoption position does it look like and why?Discuss the payoff structures for call and put options and the determinants of call and put option prices. Explain how the option pricing theory can be applied in credit risk modelling.
- Does at the money ,in the money, out of the money is used to tell about position of strike price in the market when buy or sell the option only (judge by comparing srike price and the spot price in market at that moment,Is it used to tell status of the option on expiration date by comparing srike price and the market price at expiration date or not, if not please explain to me by using some example to explain it.What is payoff to call option buyer or holder?What are the five factors that determine the value of an option, define how changes in each factor cause a change in the value of a call and put, and why do these factors cause either an increase or decrease in the value of a call or put option?