Sir, while calculating the option premium, in some question they have taken the direct value of put option and in some question they have divided the put value by 1000. please help Sir
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option premium calculation
8y ago#1It must obviously depend on the information in the question, but without seeing the questions I have no idea.
Also, you have not said whether they are related to option pricing, or to traded options (and if so, whether they are foreign currency options or interest rate options).
If they are past exam questions. then tell me which exam. If they are questions in the current edition of the BPP Revision Kit then tell me the number of the questions.
Sir, Question number 84 in Kaplan, DAIKON CO (JUN 15). Also in this question, we did not consider the time period of the option (3 months, so it should be 3/12) while calculating option premium, why?
Thank you
8y ago#3I do not have the Kaplan Revision Kit (only the BPP Kit).
However we always calculate the option premium by taking 3/12, because they are three month futures, and the premium is quoted as though an annual rate.
I explain this (and the reason for it) in my free lectures on interest rate risk management. I cannot type out all the lectures here :-)
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