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7 Cards in this Set
- Front
- Back
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American Option
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Exercised any time up to expiration date
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European Option
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Exercised only at option expiration date
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Options
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Are available on financial securities, futures contacts, interest rates, and commodities
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Interest rate collar
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Combines cap and floor
Buy cap sell floor |
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Option intrinsic value
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Payoff to the holder of the call or put options
payment occurs at expiration of the option Call option intrinsic value = Stock price - Strike price Put option intrinsic value = Strike price - Stock price If negative, intrinsic value = 0 |
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Payoff for interest rate option
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After expiration
At the end of the interest rate (loan) period specified in the contract |
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Time value of money
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Premium (Market price) - intrinsic value
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