Explain why greater volatility or a longer term to maturity leads to a higher premium on both

Question:

Explain why greater volatility or a longer term to maturity leads to a higher premium on both call and put options.

Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...
Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Financial Markets And Institutions

ISBN: 978-0132136839

7th Edition

Authors: Frederic S. Mishkin, Stanley G. Eakins

Question Posted: