The Lower Bound of a Put Option Premium Is the Greater

question 41

True/False

The lower bound of a put option premium is the greater of zero and the difference between the exercise price and the spot rate; the upper bound of a currency put option is the exercise price.

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Definitions:

Trading Securities

Investments in debt or equity securities that are purchased with the intention of selling them in the short term to profit from price fluctuations.

Unrealized Loss

A loss that results from holding on to an asset that has decreased in price, but has not yet been sold or officially recorded in the financial statements.

Fair Value

The estimated market price of an asset or liability, considering factors like utility, demand, and supply conditions, to ensure an accurate valuation.

Unrealized Gains

Profits that have been made on paper through investments but have not yet been realized through the sale of those assets.