The Payoff to the Holder of a Put Option Is

question 38

Multiple Choice

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

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

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Definitions:

Required Condition

A necessary stipulation or prerequisite that must be met for a particular procedure, operation, or situation to proceed or be considered valid.

Binomial Probability

The probability of achieving a specific number of successes in a fixed number of independent Bernoulli trials, given a certain success probability in each trial.

Dependent Trials

Experiments or processes where the outcome or result of one trial influences the outcome of another.

Experiment Characteristic

A feature or quality that defines or distinguishes an experiment, often relating to its design, participants, or outcomes.