at 5:25, I think there is a mistake in put option pay off function: Max (0, K-St) You will exercise your right to sell the underlying (i.e. Stocks) when the prices of underlying falls, giving you the profit= so the payoff for the holder of put option=(K-St) kindly have a look! (Payoff graph is also wrong for long put option)
at 5:25, I think there is a mistake in put option pay off function: Max (0, K-St)
You will exercise your right to sell the underlying (i.e. Stocks) when the prices of underlying falls, giving you the profit= so the payoff for the holder of put option=(K-St)
kindly have a look! (Payoff graph is also wrong for long put option)
Thanks Prof.Jim. Why didn't the synthetic equivalent include PV(K) in the 'All synthetic combinations' table?
I'm pretty sure that's the wrong payoff for the European Put Option?