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European put option bond lady
European options tend to sometimes trade at a discount to their comparable American option because American options allow investors more opportunities to exercise the contract. Just as there are two different types of options ( puts and calls), so there are two main styles of options: American and European. Many rookies have suffered unnecessary losses because they were unaware of the differences.
Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. (November 2015) ( Learn how and when to remove this template message)In finance, a put or put option is a stock market device which gives the owner of a put the right, but not the obligation, to sell an asset (the underlying), at a specified price (the strike), by a predetermined date (the lacy or maturity) to europen given party (the seller of the put).
The proof is that otherwise we could sell a call-option, and use thepremium to buy a share, with some cash left over. European put option bond lady expiry we have a share to satisfythe call, if exercised, together with cash which has accrued interest.A lower bound for the value of a call-optionIn the preceding chapter we saw that at expiry the value of a call-option is max(S-X,0).
We now see (Hull p199) that a lower bound for a European call-optionon nondividend paying stock is max(S - X e .