Lignum co Dec 2012

This topic has 1 reply, 2 voices, and was last updated 7 years ago by John Moffat.

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April 10, 2019 at 2:57 pm #511680
ayeshatabani
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Hi
Usually in options when we pay premium for options, we just calculate the premium and convert at spot. We dont’ apply borrowing or investing rates, why have we done it here?
April 11, 2019 at 6:36 am #511768
John Moffat
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Because the premium is payable immediately rather than at the date it is exercised (i.e. than the date of the transaction).

It is a minor point for the exam, but a nice point to mention.
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