Option value

Discussion in 'P1.T3. Financial Markets & Products (30%)' started by darshang3, Sep 7, 2009.

  1. darshang3

    darshang3 New Member

    Hi david...

    As interest rate increases the value of call increases and he value of put decreases.........

    can u tell me how interest rate can change the option values....
  2. syaiful

    syaiful Member

    Hi Darshang, :lol:

    Simply just use Put-Call-Parity
  3. David Harper CFA FRM

    David Harper CFA FRM David Harper CFA FRM (test)

    Exactly, or you can even use the minimum value (lower bound) to recall the impact of interest rate, which is often useful:

    c = S - K*e^(-rT); i.e., the value if vol = 0

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