What Is the Boundary Condition for a European Put Option

question 1

Multiple Choice

What is the boundary condition for a European put option?

• A) Max [0,S(T)-K]
• B) Max [0,K-S(T)]
• C) Min [0,S(T)-K]
• D) Min [0,K-S(T)]

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Definitions:

Stop-Loss

An order placed with a broker to buy or sell once the stock reaches a certain price, designed to limit an investor's loss on a security position.

Shelf Registration

Advance registration of securities with the SEC for sale up to 2 years following initial registration.

Primary Market

The financial market for new issues of securities, where buyers purchase directly from the issuer.

Stop-Buy Order

An order to purchase a security once its price surpasses a particular point, typically to limit a loss or protect a profit on a short sale.