For a call option, the(1)_______value is the difference between the current stock price and the option's strike price and the (2)__________is the difference between the option's market price and its exercise value. A riskless hedge is a hedge in which an investor buys a stock and simultaneously sells a call option on that stock and ends up with a riskless position. The Binomial Option Pricing Model is an option pricing model based on a riskless hedge with two scenarios for the value of the underlying asset. The Black-Scholes Option Pricing Model (OPM) is derived from the concept of a riskless hedge and calculates the value of an option as the difference between the expected PV of the terminal stock price and the PV of the exercise price.

1)

market

premium

margin

exercise

2)

market

premium

margin

exercise