When a trader writes a cash-settled call option, they agree to pay their counterparty Max(0, ST -
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When a trader writes a cash-settled call option, they agree to pay their counterparty
Max(0, ST - K) at option maturity. Thus the trader never expects to receive a payment and may have to make a payment. Thus, the best the trader can ever do is to pay nothing. Why would the trader every agree to such an arrangement?
Related Book For
Business Statistics a decision making approach
ISBN: 978-0133021844
9th edition
Authors: David F. Groebner, Patrick W. Shannon, Phillip C. Fry
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