Q2. Underlying at $100 and MAD at $10. PUT option has strike of $95. Q2a. What is the probability for PUT to be in the money? Q2b. What is the average price of the underlying conditional on PUT expiring ITM? Q2c. Based on Q2a and Q2b, how much should the 95 PUT be priced at? Q2d. For Q2c PUT price, how much of it is time value and how much is intrinsic value (aka exercise value)? Q2e. Redo Q2a-Q2d for 105 strike CALL.

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Market Efficiency

Market efficiency refers to the market's ability to provide investors with all available information about investment options for buying and selling securities. Market efficiency reflects the true value of securities without undervaluing or overvaluing them. When the quality and quantity of information increase, the market becomes more efficient, allowing it to reduce arbitrage and obtain higher market returns from investment. In a well-functioning market, everyone receives all information completely and immediately at no cost. It opens up a plethora of opportunities for investors to access various investment options.