Asked by hannah pyron on Jun 14, 2024
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According to the Black-Scholes model, when the risk-free rate increases, it results in a decrease in the value of a call option.
Black-Scholes
A mathematical model used to price European options, evaluating their potential value by factoring in volatility, asset price, time, and risk-free rate.
Risk-Free Rate
The theoretical rate of return on an investment with zero risk, often represented by the yield on government bonds.
Call Option
A financial contract giving the option buyer the right, but not the obligation, to buy a stock, bond, commodity, or other asset at a specified price within a specific time period.
- Learn about the components that affect option pricing and their ramifications.
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Learning Objectives
- Learn about the components that affect option pricing and their ramifications.
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