Question
When a trader writes a cash-settled call option, they agree to pay their counterparty Max(0, ST - K) at option maturity. Thus the trader never
When a trader writes a cash-settled call option, they agree to pay their counterparty
Max(0, ST - K) at option maturity. Thus the trader never expects to receive a payment and may have to make a payment. Thus, the best the trader can ever do is to pay nothing. Why would the trader every agree to such an arrangement?
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Step: 1
If Price of the stock is then the strike Price K then Tr...
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Business Statistics A Decision Making Approach
Authors: David F. Groebner, Patrick W. Shannon, Phillip C. Fry
9th Edition
013302184X, 978-0133021844
