- This topic has 3 replies, 2 voices, and was last updated 6 years ago by
.
- Posts
BSOP requirement a,
Sir in my text book it was written that value of option is made up of 2 thing
1) intrinsic value
2) time valueand intrinsic value is calculated by comparing Pa-Pe
In this question Pa is $23.128 and Pe is $24 so the intrinsic value shouldn’t be “Nil”
But in the answer it was written the value of option $5.95m is made up of intrinsic value of $4m and time value of $1.95m
Can you explain me this with a proper reason to understand???
Pa is $28. I don’t know where you are getting $23.128 from.
Have you watched by free lectures on option pricing and on real options?
Actually question is related to delay the decision for 2 year
before delaying the decision Pa was $28m but after delaying for 2 year Pa was $23.128m or $23.13m
this is why i m confused, which one i should use when calculating intrinsic value??
(Note this was not part of the original requirement, i m just asking to clear my concept)
- You must be logged in to reply to this topic.