Cash Flows and Characteristics of Puts and Calls
Free SOA Exam FAM (Fundamentals of Actuarial Mathematics) lesson in Option Pricing Fundamentals. 9 min read, ~1,351 words.
Long call payoff:. Long put payoff:. Profit = payoff accumulated premium ( ). European: exercise at only. American: any time up to. Call ITM when. Put ITM when. No-arb bounds: call; put.
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What this lesson covers
- Content
- Example 1
- Example 2
- Common Mistakes
- Key Takeaways
- Exam Shortcuts
Learning objectives
- 6a
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