This question was there in the SSEI book as well and sir made us mark option c) as the answer . But in candidate resource , the answer is given as a).
can anyone pls explain how is that? If NCC is positive shouldn’t the price of the forward be higher as compared to zero ncc.
SnehitBeginner
Derivative pricing
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The same question has been answered multiple times on this platform please check DV section.
Hope this helps !
In simple terms NCC is benefits-cost
Benefits is related to the original asset eg dividend yield
NCC is a positive function of benefits therefore if NCC is positive it means the asset is providing higher benefits and by logic, you would like to hold the asset instead of the derivative thus price of the derivative will be lower .
Hope this helps.