The Two Parts That Make Up an Option's Price Are

question 46

Multiple Choice

The two parts that make up an option's price are:

• A) extrinsic value and the time value of the option.
• B) the commission and the time value of the option.
• C) the intrinsic value and the time value of the option.
• D) the price of the underlying asset and the time value of the option.

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Definitions:

Exponentially Distributed

Pertaining to a continuous probability distribution used to model the time between events in a process that occur continuously and independently at a constant average rate.

Probability Distribution

An equation in mathematics that calculates the likelihood of diverse outcomes in an experimental scenario.

Exponential Distribution

A probability distribution associated with the time between events in a Poisson process, characterized by a constant mean rate.

Parameter

A measurable attribute that characterizes a system or population, such as its mean or variance.