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Question 1 Define a Call Option and answer the following questions: What is the payoff function of a long position in a Call Option? When

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1

Define a Call Option and answer the following questions:

What is the payoff function of a long position in a Call Option?

When is a Call Option exercised?

When does a long position in a Call Option generate a profit?

What is the payoff function of a short position in a Call Option?

Is a Call Option a zero

-

sum game?

What is the difference between a European Call Option and an American Call Option?

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