View unanswered posts | View active topics It is currently 16 Aug 2018



Reply to topic  [ 4 posts ] 
 CFA online practice tests 
Author Message

Joined: 01 Mar 2013
Posts: 21
space
I feel that sometimes they are just trying to trick you. for example,
a security’s exercise price is 65 and call option’s current value is 8.5
I am assuming at this point that security is trading iat 73.5
Anyway, question asks.
*If* the security is treading at 70, the credit risk is:
I calculated option’s new value to be 5 and that is incorrect. Because current value is actually 8.5


07 Jul 2015
Profile
space

Joined: 01 Mar 2013
Posts: 12
space
The option is NOT at expiration, therefore the the options intrinsic value is $5, but the extrinsic value is $3.5 (since they tell you the premium is $8.5)
For a long option holder the credit risk is the price of the option = 8.5.


07 Jul 2015
Profile
space

Joined: 01 Mar 2013
Posts: 22
space
Which makes sense, since the option has a time value of 3.5.


07 Jul 2015
Profile
space

Joined: 01 Mar 2013
Posts: 13
space
cohiba42 wrote:
The option is NOT at expiration, therefore the the options intrinsic value is $5, but the extrinsic value is $3.5 (since they tell you the premium is $8.5)
For a long option holder the credit risk is the price of the option = 8.5.
Got it.. thanks!


07 Jul 2015
Profile
Display posts from previous:  Sort by  
Reply to topic   [ 4 posts ] 

Who is online

Registered users: Bing [Bot], Google [Bot]


You cannot post new topics in this forum
You cannot reply to topics in this forum
You cannot edit your posts in this forum
You cannot delete your posts in this forum
You cannot post attachments in this forum

Search for:
Jump to:  
Powered by phpBB® Forum Software © phpBB Group

Copyright © 2004-2017 AnalystSpace.net. All Rights Reserved