FREE Trial

Explain the relation between a put option (with strike price K and maturity date T years from

Question:

Explain the relation between a put option (with strike price K and maturity date T years from today) and a T -period insurance policy that insures the stock for K dollars.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Answer rating: 75% (12 reviews)

A put option is an insurance policy that pays out K dollars upon the occurren...View the full answer


answer-question-section
Answered By
tutor-profile-image
James Warinda
Hi! I’m James Otieno and I'm an experienced professional online tutor with countless hours of success in tutoring many subjects in different disciplines. Specifically, I have handled general management and general business as a tutor in Chegg, Help in Homework and Trans tutor accounts. I believe that my experience has made me the perfect tutor for students of all ages, so I'm confident I can help you too with finding the solution to your problems. In addition, my approach is compatible with most educational methods and philosophies which means it will be easy for you to find a way in which we can work on things together. In addition, my long experience in the educational field has allowed me to develop a unique approach that is both productive and enjoyable. I have tutored in course hero for quite some time and was among the top tutors awarded having high helpful rates and reviews. In addition, I have also been lucky enough to be nominated a finalist for the 2nd annual course hero award and the best tutor of the month in may 2022. I will make sure that any student of yours will have an amazing time at learning with me, because I really care about helping people achieve their goals so if you don't have any worries or concerns whatsoever you should place your trust on me and let me help you get every single thing that you're looking for and more. In my experience, I have observed that students tend to reach their potential in academics very easily when they are tutored by someone who is extremely dedicated to their academic career not just as a businessman but as a human being in general. I have successfully tutored many students from different grades and from all sorts of backgrounds, so I'm confident I can help anyone find the solution to their problems and achieve
0.00 0 Reviews 10+ Question Solved
Related Book For  book-img-for-question
An Introduction To Derivative Securities Financial Markets And Risk Management

An Introduction To Derivative Securities Financial Markets And Risk Management

ISBN: 9781944659653

2nd Edition

Authors: Robert A. Jarrow, Arkadev Chatterjee

See More Books
Question Posted:
See More Questions

Related Video

A put option is a financial contract that gives the owner the right, but not the obligation, to sell an underlying asset, such as a stock or a commodity, at a predetermined price, known as the strike price, on or before a specific date, known as the expiration date. Put options are used by investors as a form of insurance against a decline in the value of the underlying asset. If an investor expects the value of an asset to fall in the future, they can purchase a put option on that asset. If the value of the asset does fall, the put option will increase in value, allowing the investor to sell the asset at the higher strike price. For example, if an investor owns 100 shares of a stock that is currently trading at $50 per share, they may purchase a put option with a strike price of $45 and an expiration date three months in the future. If the stock price falls to $40 before the expiration date, the investor can exercise the put option and sell their shares for $45 each, even though the market price is only $40. This would allow the investor to limit their losses. It\'s important to note that purchasing a put option involves paying a premium to the seller of the option, and the investor can lose the entire premium if the price of the underlying asset does not decline as expected. Put options are just one type of financial derivative and should only be used by experienced investors who understand the risks involved.

Students also viewed these Business questions

Strategic Marketing In Tourism Services 1st Edition - ISBN: 1780520700 - Free Book