OPTIONS - EC3070 FINANCIAL DERIVATIVES OPTIONS Options...

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EC3070 FINANCIAL DERIVATIVES OPTIONS Options consist of rights to buy or rights to sell, which can be exercised or foregone at the discretion of the holder. The right to sell is called a put option and the right to buy is called a call option. In either case, the party who acquires the right is the holder of the option, whereas the party who has the liability, and who is paid a price or a premium , is the writer of the option. In either case, there are short and long positions. The party owning the right to buy in a call option of the right to sell in a put option is on the long side of the contract. The party with the liability is on the short side of the contact. Call Put Short liability to sell liability to buy Long right to buy right to sell The price agreed in the contract is called the exercise price or the strike price. The date written into the contract is called the expiry date or the maturity date. European options can be exercised only on the date of expiry, whereas American options
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This note was uploaded on 03/02/2012 for the course EC 3070 taught by Professor D.s.g.pollock during the Spring '12 term at Queen Mary, University of London.

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OPTIONS - EC3070 FINANCIAL DERIVATIVES OPTIONS Options...

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