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Postby sun.7674 » Tue May 12, 2015 4:01 pm

In case of american and European call ,lower bound why it is required to discount the strike price with (1+RFR)^T-t
and same for lower bound European put and upper bound of European put. and what does " t " denote for? is it the time which has past?

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Re: Derivative

Postby edupristine » Wed May 13, 2015 11:02 am

No. This is the time remaining to expiration. For example in a laymen language your are squaring off your position in 1 year call option but after 7 months so your time to expiration will be 5 months(t).

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