Explain What Is Meant by a Novation

question 85

Essay

Explain what is meant by a novation.

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Definitions:

Maximum Profit

The highest possible financial gain achievable in a transaction, strategy, or investment, assuming optimal conditions.

Maximum Potential Profit

The highest possible gain that may be achieved on a trade or investment, assuming the most favorable set of circumstances.

Call Contract

An agreement giving the option buyer the right to buy a specified quantity of a security at a set price within a specific time frame.

Options Exercised

The act of implementing the right to buy (call option) or sell (put option) an underlying asset at a predetermined price before the option expires.