Put option price risk free rate increases


Put option price risk free rate increases


The US Federal Reserve is expected to raise the interest rates in coming months. Interest rate changes impact the overall economy, stock market, bond market, other financial incrfases and can influence macroeconomic factors. A change in interest rates also impacts option valuation, which is a complex task with multiple factors, including the price of the underlying asset, exercise or strike price, time to expiry, risk-free rate of return (interest rate), volatility, and dividend yield.

While the math behind options-pricing models may seem daunting, the underlying concepts are not. The first three deservedly get most of the attention because they have the largest effect on option prices. But it is also important to understand how dividends and interest rates affect the price of a stock option. Only in-the-money options have intrinsic value. Increase DecreaseAnswer: A. Risj would the put option be worth more. Put another way, if (r) goes up, we need to deposit less cash today to receive back the same fixed strike price in the future.

I hope that helps, thanks.




Put option price risk free rate increases

Put option price risk free rate increases


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