What is in-the-money option?

Q: Which is the better investment option?

A: The process of finding the present value using the future value, interest rate and the compounding…

Q: What is Lump-sum cash-value option?

A: The option is the contract with two or more options for the financial instrument. The lump-sum cash…

Q: option

A: Call options are those options which gives the right but not the obligation to the buyer to purchase…

Q: Describe about the Option-pricing models?

A: The option pricing model utilizes factors (stock value, exercise price, volatility, interest rate,…

Q: What’s the difference between a financial optionand a real option? What are some specific typesof…

A: Answer: Differences between financial options and real options: Financial options are those…

Q: Describe Option-Pricing Theory.

A: Option pricing theory is a technique used to calculate the fair value of an option by using…

Q: payoff for put option buyer and seller?

A: A put option is an instrument which provides its holder an option to sell an underlying asset on a…

Q: How does risk affect interest rates?

A: The risk and the interest rates are in a direct relationship that is, the greater the risk the…

Q: What is a financial option? What is the singlemost important characteristic of an option?

A: Answer: A type of financial security that derives its value from the value of a particular…

Q: v, what is the Capitalized Cost of the 1st Option?

A: Capitalized Cost: It is the cost from the purchase of the fixed asset expected to generate some…

Q: Which are the Elements of Portfolio Theory?

A: Portfolio theory: The theory of portfolio is about risk and return. The investor is concerned…

Q: What is the risk premium?

A: CAPM is the method of calculating the expected return on investment. The formula to calculate the…

Q: What are the five variables that affect the value of an option, and how do changes in each of these…

A: Option price refers to the price at which buyers purchase the stock or have the right to buy or sell…

Q: What is hedge portfolio?

A: Hedge portfolio It consists of the long position in a security i.e stock and also the long position…

Q: What are your

A: Alternative finance refers to financial channels, processes, and instruments that have emerged…

Q: Briefly describe what an investment timing option is and why such options are valuable.

A: There are various time arises where the company need to choose between  in order to make the…

Q: Discuss how equity can be viewed as an option. Who has theoption, and what decision can they make?

A: If an enterprise cannot satisfy its contractual obligation of debt, it is in default for every…

Q: Explain Price Return Swap?

A: A derivative contract which enables two parties to exchange financial instruments, cash flows,…

Q: What is margin requirement (for futures)?

A: Solution:- A Margin Requirement is the share of marginable securities that an investor should pay…

Q: What is the fair value option?

A: Fair value: Fair value is the price at which, both seller and buyer agree to exchange the asset. So,…

Q: Options serve the same purpose as futures in that respect but are fundamentally different. How?

A: Options and futures are similar trading products that provide investors with the chance to make…

Q: What is market risk?

A: Investments in assets are subject to risks and uncertainty of returns  Risks can be systematic or…

Q: Define Black-Scholes option pricing model

A: Assumptions of Black-Scholes option pricing models: There is no dividend during the lifetime of the…

Q: What are the implications of interest rate parity theorem.

A: Interest rate Parity:- The interest rate parity (IRP) theory states that the difference between the…

Q: What is market risk premium?

A: Market risk premium is an additional return investor will receive for holding the additional risk in…

Q: What is the payoff to call option buyer and seller?

A: Call option A call option is referred to as the financial contract which provides its holder an…

Q: What is out-of-the money option?

A: Out of money options are generally preferable for the investors. This is because they are more…

Q: What is the portfolio's return?

A: The total investment returns produced on individual assets multiplied by the weight class of that…

Q: is payoff to call option buyer or h

A: A call option is an instrument which provides its holder an option to buy an underlying asset on a…

Q: What are the assumptions of Option-pricing models?

A: There are two option pricing models they are: Binomial model option pricing model Black Scholes…

Q: What is counterparty risk?

A: Counterparty risk can exist in trading, credit, investment.

Q: What is financial futures?

A: Financial futures are the contracts that are used for the selling and purchasing of different types…

Q: What is market portfolio?

A: A pool of investments that comprises of all the available investment opportunities across the globe…

Q: What is the buy option?

A: A buy option involves two types which are : Buy call option Buy put option

Q: What is market value?

A: Market value is the competitive price at which an asset will sell in the market. It is the highest…

Q: to put option buyer or hol

A: A put option is an instrument which provides its holder an option to sell an underlying asset on a…

Q: What is the purpose of the Black–Scholes Option Pricing Model?

A: Black-Scholes is a pricing model used to determine the fair price or theoretical value for a call or…

Q: What are options?

A: Since you have posted a question with multiple sub-parts, we will solve the first three subparts…