Credit default swap index option trading23 comments
Binary number system counting
I read a question from question bank, and the answer include a sentence: By using call options investors save more money by not paying for the underlying until later date and earn higher interest meanwhile. I would say the above is exactly correct. A call option can be looked at as the right to delay a purchase. The higher interest rate you can earn on the cash generated from that sale, the less desireable it is to delay that sale. Another way of looking at that. In the risk neutral world all assets are expected to grow at the RFR on average.
If the RFR rate is lower, stock prices are expected to appreciate less. Therefore, your call price will go down, your put price will go up. Technically, in a risk neutral world, there are other factors that influence forward rates, not just the risk free rate. However, the basic concept there is correct. Look me in the eye, it's ok if your scared, so am I, but we're scared for different reasons Skip to main content. Be prepared with Kaplan Schweser.
Study for Success in Raza Syed Sep 9th, 1: I try to explain in very simple words. When interest rates are higher call options prices are higher when IR interest rates are higher opportunity costs of holding money is higher.
When interest rates are higher put options prices are lower when IR are higher opportunity costs of waiting is higher because investors lose more interest while waiting to sell the underlying when using puts. If u understand this then decrease in IR can be easily understood. It is the best forum. The Baron Sep 11th, 5: Charterholder 41 AF Points. I got it with thanks my friends!!!