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ignoring the zero here, exercise value for a option, let’s say call, is = S at time t – PV of X OR
EV of call = S at time t – X ???
Bcoz in core and Module 8, EOC Q3, we used PV of X but in class notes we used only used X.
CALL KA MATLAB RIHT TO BUY AT X AFTER SOME TIME ,IF YOU EXCERCISE IT BEFORE THAT TIME THO OVIO IT WILL BE THE PRESENT VALUE
But an exercise value or intrinsic value of call option is [St – X] , where t=time where we are standing today, bcoz an Eur opt can only be exercised at t=T (or maturity) and even Amer. opt are logical to exercise at T only.
It’s min. value of call opt (Amer Eur both) = S(t) – PV of X.
Isn’t it? (Correct if I’m wrong.)