FRM L1 - Pricing Bounds of Option | Important Topic
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- Опубліковано 27 вер 2024
- In this session, we will cover FRM Level 1 Crash Course - Pricing Bounds of Option from Book - Financial Markets and Products - Chapter Properties of Option
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Amazing session
Thank You !!
Thanks sir
Super like
Amazing explanation sir. This also helps me in preparing for the derivatives part of CFA L1. This was really confusing. Thank you for explaining so logically.
Buddy I am preparing for FRM level 1 can you please guide me
Thanks for your feedback
Thank you
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It would be nice if you explained the arbitrage opportunities that could happen if the price of the call and put options are below the lower bound.
At 12:00, if the strike price of call option is $200, and the value of underlying asset at maturity is let say $500. IN this case the person at long position will exercise the option and will buy the stock at $200 from the person at short position. In this case , person at the short position lost $500-$200 =$300 because if he had sell the stock at spot price he would have get $500. How in this case the person booked a arbitrage profit of $10. Can someone help me.
Upper bound is
spot price for call and
Strike price for put
Lower bound is
Spot - PV(K) OR 0 for call ( for both European and American )
PV(K) - Spot OR 0 for Put ( European )
K - Spot OR 0 for Put ( American )
It's not good to exercise American Options earlier for the reason of loss of extrinsic value.
If is not deep ITM.
Thank you sir
Thank you, sir, very understandable after your plain explanation.
It is really amazing. You taught really well.
How to calculate present value
Thank you so much sir
Most welcome
Thank You Sir
Sir can a non maths student pursue frm?
Yes dear Non Maths students can also apply for the exam
True Gem.
True Gem.