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. 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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