The Payoff to the Holder of a Call Option Is

question 8

Multiple Choice

The payoff to the holder of a call option is given by:

• A)C = max(S - K,0).
• B)C = min(K,0).
• C)C = max(K - S,0).
• D)C = min(K - S,0).

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Definitions:

Variance

A statistical measure that represents the spread or dispersion of a set of data points or investment returns from their mean.

Efficient Market

A market hypothesis stating that asset prices fully reflect all available information, making it impossible to consistently achieve higher returns.

Security Price

The cost or value at which a financial security is bought and sold in the marketplace.

New Information

New information refers to previously unknown data or knowledge that becomes available, influencing decisions, behaviors, or outcomes in various contexts like markets, research, or daily activities.