The Payoff to the Holder of a Call Option Is

question 50

Multiple Choice

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

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

---

Definitions:

Private Good

A product or service that is excludable and rivalrous, meaning its use by one individual prevents others from using it, and it can be kept exclusive to those who pay for it.

Marginal Cost

The rise in cost resulting from the manufacture of an additional unit of a product or service.

Public Good

A product or service that is non-excludable and non-rivalrous, meaning that one's use of the good does not reduce its availability to others.

Positive Externality

A benefit that is enjoyed by a third-party resulting from an economic transaction to which they were not involved.