What Is the Payoff to Buyers and Sellers of Call

question 23

Essay

What is the payoff to buyers and sellers of call and put options?

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Definitions:

Normal Probability Distribution

A statistical function that describes all the possible values and likelihoods that a random variable can take within a given range, characterized by its bell-shaped curve, symmetric about the mean.

Standard Deviation

A statistical metric that quantifies the dispersion or variability of a dataset relative to its mean.

Mean

The average of a set of numbers, calculated by dividing the sum of the values by the number of values.

Standard Normal Variable

A standard normal variable is a random variable that follows a normal distribution with a mean of zero and a standard deviation of one.