The Premium of an Option Is

question 1

Multiple Choice

The premium of an option is

• A) The price of the option.
• B) The value of the right but not the obligation to undertake a purchase or sale of the underlying asset.
• C) Is always non-negative.
• D) All of the above.

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Definitions:

Contextual Intelligence

The aptitude to understand and apply knowledge effectively across varied situations by keenly evaluating the contextual factors.

Factor Analysis

A statistical method used to describe variability among observed, correlated variables in terms of a potentially lower number of unobserved variables called factors.

Justification of Effort

The tendency for individuals to attribute a greater value to an outcome they had to put effort into achieving or acquiring.

Affect Heuristic

The tendency to consult one’s emotions instead of estimating probabilities objectively.