Let C be the price of a call option to purchase a security whose present price is S. Explain why C is less than or equal to S. I'm just thinking it wouldn't make financial sense to pay more for the call option than the present price of the security. I'm not sure if there is more of an explanation that is needed. I was also wondering is there any time when it would be favorable to pay more for the call option than the present price of the security?
Let C be the price of a call option to purchase a security whose present price is S. Explain why C is less than or equal to S. I'm just thinking it wouldn't make financial sense to pay more for the call option than the present price of the security. I'm not sure if there is more of an explanation that is needed. I was also wondering is there any time when it would be favorable to pay more for the call option than the present price of the security?
Chapter5: Currency Derivatives
Section: Chapter Questions
Problem 4BIC
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Let C be the price of a call option to purchase a security whose present price is S. Explain why C is less than or equal to S.
I'm just thinking it wouldn't make financial sense to pay more for the call option than the present price of the security. I'm not sure if there is more of an explanation that is needed. I was also wondering is there any time when it would be favorable to pay more for the call option than the present price of the security?
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