What are the assumptions of Option-pricing models?

Q: Differentiate between price risk and reinvestment risk.

A: Price risk is the risk of decline of the price of the investment or an asset after the underlying…

Q: What are the assumptions of efficient market hypothesis? Discuss.

A: The efficient market hypothesis (EMH) is a hypothesis theory which states that share prices reflect…

Q: The company offered its investors option contracts to buy their shares at P72 with the current price…

A: Put option: It is the right given to the owner to sell the share at a specific price and date. When…

Q: What is the difference between a Put option and a Call option? Explain. Provide examples.

A: Option is a derivative instrument which gives a choice to its buyer to buy or sell the underlying…

Q: How widely used is real option analysis?

A: Real option analysis is the analysis of a company’s opportunity cost of an investment or a…

Q: what is the difference between a call option and a put option?

A: There are two types of options one is call option and other is put option and both are derivative…

Q: Describe about the Option-pricing models?

A: The option pricing model utilizes factors (stock value, exercise price, volatility, interest rate,…

Q: Describe the Market-Value Analysis?

A: Market Value is a solid indicator of investor or shareholder capital. All things considered, what…

Q: Describe Option-Pricing Theory.

A: Option pricing theory is a technique used to calculate the fair value of an option by using…

Q: In a qualitative analysis, what factors affect the value of a real option?

A: An alternate choice that is accessible to the organization's managers taking investment…

Q: What discount rate is used in a lessor’s NPV analysis?

A: Weighted average cost of capital is used as discount rate in Lessor's NPV analysis.

Q: What is offer price?

A: Bid price is the maximum price which the buyer is willing to pay to purchase. In other words, it…

Q: Explain the following terms, Option price and Strike price

A: Option price and strike price are essential terms which are used in derivative markets. These are…

Q: What are the Black-Scholes Options Pricing Model's underlying assumptions?

A: The Black-Scholes Options Pricing Model can be defined as the pricing model used to ascertain the…

Q: What is market portfolio?

A: A pool of investments that comprises of all the available investment opportunities across the globe…

Q: What effect does Risk-free rate have on call option price?

A: Risk-free rate is the rate of return from an investment having no risk or zero risk. In other words,…

Q: risk with practical examples

A: Default risk is the risk that a lender takes on in the chance that a borrower will be unable to make…