Explain the difference between the payoff and price of an option. Write down the payoff formula for
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Explain the difference between the payoff and price of an option. Write down the payoff formula for a call option and for a put option. What is the difference between the “gross” and “net” payoffs of an option (as widely applied in common usage)? Which concept do you think is the more useful one for valuing an option? Why?
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The terms payoff and price of an option refer to different aspects of an option contract The payoff of an option refers to the amount of money that th...View the full answer
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