A chooser option (also known as an as-you-like-it option) becomes a put or call at the discretion
a. If the chooser option and the underlying options expire simultaneously, what ordinary option position is this equivalent to?
b. Suppose that the chooser must be exercised at t1 and that the underlying options expire at T. Show that the chooser is equivalent to a call option with strike price K and maturity T plus e−δ(T−t1) put options with strike price
Ke−(r−δ)(T−t1) and expiration t1.
In finance, the strike price of an option is the fixed price at which the owner of the option can buy, or sell, the underlying security or commodity. 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 located the answer you've been seeking!
Step by Step Answer: