Question: Why does a discounted cash-flow approach to options valuation not work? Finding the opportunity cost of capital is impossible as the risk of options changes
Why does a discounted cash-flow approach to options valuation not work?
| Finding the opportunity cost of capital is impossible as the risk of options changes every time the stock price moves. | |
| One cannot find the appropriate interest rate for an infinitely small interval. | |
| The strike price of options changes. | |
| It is impossible to estimate expected cash flows. |
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