Asked by Justice Johnson on Jun 15, 2024
Verified
The value of an American call option is increased when the value of the underlying asset increases.
American Call Option
A type of options contract that gives the holder the right, but not the obligation, to buy a specific amount of a security at a specified price within a specified time period.
Underlying Asset
The specific security, commodity, or other financial instrument that a financial derivative, such as an option or futures contract, is based upon.
- Detail the valuation criteria for American call options and the variables that influence their valuation.
Verified Answer
CL
Connor LeiderJun 21, 2024
Final Answer :
True
Explanation :
The value of an American call option, which gives the holder the right to buy the underlying asset at a specified price before or at expiration, typically increases as the value of the underlying asset increases, because the option becomes more valuable if it allows purchasing the asset below its current market price.
Learning Objectives
- Detail the valuation criteria for American call options and the variables that influence their valuation.