When Valuing an Interest Rate Call Option,one Approach Is to Use

question 41

Multiple Choice

When valuing an interest rate call option,one approach is to use the Black call option price adjusted for the present value

• A)over the m days of the underlying option using the continuously compounded forward rate.
• B)over the m days of the underlying rate using the continuously compounded spot rate.
• C)over the days remaining of the option using the continuously compounded forward rate.
• D)over the days remaining of the option using the continuously compounded spot rate.
• E)over the m days of the underlying rate using the continuously compounded forward rate.

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Definitions:

Bulk Flow

A movement of molecules from an area of higher pressure to an area of lower pressure, typically referring to fluids and gases.

Adenine

A purine nucleobase, one of the four nucleobases in the nucleic acid of DNA and RNA, paired with thymine in DNA and with uracil in RNA.

ATP

Adenosine triphosphate, a molecule that stores and transfers energy within cells, thereby powering a multitude of cellular processes.