Figure 7.3 graphs the value of the call option as a function of the value of the underlying stock. Graph the value of a call option (vertical axis) against
(a) σ, the instantaneous standard deviation of the returns on the underlying asset
(b) rf, the risk-free rate
(c) T, the time to maturity
Figure 7.3

Transcribed Image Text:

AW Buy a call. C Buy a pu. P Cerf PefT AS AS -CerfT Sell a call,-C Sell a put. P