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Unformatted text preview: iagram as the value of the call (put) option is the difference
between the underlying stock price and the exercise price (the exercise price and underlying stock price).
For a given underlying stock price the value of the call decreases (put increases) when the exercise price
3. Volatility of the underlying stock price Consider call options on two stocks. The only difference between the two call options is the volatility in
the underlying stock price: One stock has low stock price volatility, whereas the other has high. This
difference is illustrated in the position diagrams where the bell-shaped line depicts the probability
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This note was uploaded on 10/26/2012 for the course 19 19 taught by Professor - during the Spring '12 term at Sunway University College.
- Spring '12