Cfa level 1 derivatives

mehak.officiallink
Good Student
Posts: 31
Joined: Sat Mar 08, 2014 6:59 am

Cfa level 1 derivatives

Postby mehak.officiallink » Sun Apr 06, 2014 8:11 am

What does lower bound and upper bound means ?
Does option value means the premium amount or the exercise price ?
Why is the upper bound of put option equal to exercise price ?

pradeeppdy
Finance Junkie
Posts: 258
Joined: Thu Sep 20, 2012 3:42 pm

Cfa level 1 derivatives

Postby pradeeppdy » Mon Apr 07, 2014 5:52 am

The upper and lower bound of options means the maximum and minimum value which an option go upto . The maximum value of a european call is the price of the underlying stock . And the minimum value of a european call can never go below the difference between value of the asset and strike price of the underlying asset.

Option value means the premium at which the option of underlying asset is being traded.


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