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In April 1973 the first modern options exchange opened in Chicago. A month later Fisher Black and Myron Scholes, two financial theorists from the University
"In April 1973 the first modern options exchange opened in Chicago. A month later Fisher Black and Myron Scholes, two financial theorists from the University of Chicago, showed for the first time, how to value an option. Good timing helped to make their paper one of the most immediately useful economics articles ever written ... Stephen Ross of Yale University has described the Black-Scholes formula as the most successful theory not only in finance but in all economics." (The Economist, February 16, 1991, p 64) Required: Discuss the factors that influence an option's value. In your discussion, state whether each factor has a positive or negative effect on both a call and a put option's price. Motivate your answers. Draw a distinction between an options intrinsic and time value and mention which of the aforementioned factors affect each. Maximum length 2 pages
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