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Londonrocks

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发表于 2011-7-13 17:05 | 只看该作者
@ Job

But all things are not assumed equal in this question. The answer says that it is ALWAYS preferable to exercise an American put at the expiration date.

Consider 2 scenarios where it is NOT ideal to exercise a put at the expiration date:

1) The underlying stock of the put has been depressed so low that the holder of the put option believes that the price is irrationally low and the potential rebound of the stock price before expiration might eat away at his gains. Chances are the amount of the dividend will not be near enough to compensate for the extra gain he can get by exercising this put when the stock is at this irrationally low price. After all, he can exercise his put and then buy the stock right back if he wants to capture any dividends or upward price movements.

2) The put is out of the money.

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manasib

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发表于 2011-7-13 17:05 | 只看该作者
On question 9th I am also agree with KickinTheBricks regarding answer of it...please some1 clarify what is the correct answer?

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ramdabom

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13#
发表于 2011-7-13 17:06 | 只看该作者
can we see the answers now?

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ogoluwa

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14#
发表于 2011-7-13 17:06 | 只看该作者
He posted them - a few posts up.

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MythosHF

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15#
发表于 2011-7-13 17:06 | 只看该作者
my mistake, where are these from?

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Bulla564

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发表于 2011-7-13 17:06 | 只看该作者
wow, maybe i should read the actual thread before posting form now on haha, sorry

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dmar

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17#
发表于 2011-7-13 17:06 | 只看该作者
Ok can someone go over #8? I thought SML only measures individual assets and portfolios is for CML/Efficient frontier

For #9, cfa has like 3 definitions of duration, I'm sure one of them is that its a measure of the time to maturity. Like for zero coupon bounds, duration = maturity years

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