A Call Option Is

question 57

Multiple Choice

A call option is:

• A) any option written more than sixty days into the future.
• B) an option giving the holder the right to buy a given quantity of an asset at a specific price on or before a specified date.
• C) an option giving the seller the right to sell a given quantity of an asset at a specific price on or before a specified date.
• D) an option where all rights are granted to the seller of the option.

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Definitions:

Investment Bank

A financial institution that acts as an intermediary in the issuance of securities and offers corporate services like mergers and acquisitions advice.

CDOs

Abbreviation for Collateralized Debt Obligations, a type of structured asset-backed security with multiple tranches.

Securities

Financial instruments that represent an ownership position in a publicly-traded corporation (stock), a creditor relationship with a governmental body or a corporation (bond), or rights to ownership such as options.

Negative Amortization

A situation in a loan where the monthly payments are not enough to cover the interest costs, causing the loan balance to increase rather than decrease over time.