FRM L1 - Pricing Bounds of Option | Important Topic

In this session, we will cover FRM Level 1 Crash Course - Pricing Bounds of Option from Book - Financial Markets and Products - Chapter Properties of Option
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[@rakhinarula8580]

Amazing session

[@Fintelligents]

Thank You !!

[@bakytzhanzhaparov1846]

Thank you, sir, very understandable after your plain explanation.

[@rahul__sharma__]

It is really amazing. You taught really well.

[@add4fun559]

Thanks sir

[@Fintelligents]

Super like

[@vivalavica.08]

Amazing explanation sir. This also helps me in preparing for the derivatives part of CFA L1. This was really confusing. Thank you for explaining so logically.

[@rishabhtiwari2084]

Buddy I am preparing for FRM level 1 can you please guide me

[@Fintelligents]

Thanks for your feedback

[@AR-em7gz]

It would be nice if you explained the arbitrage opportunities that could happen if the price of the call and put options are below the lower bound.

[@Sanskarmodi16]

Thank you so much sir

[@Fintelligents]

Most welcome

[@rajatrajawat2534]

True Gem.

[@user-xh2vn6mh3h]

Thank you

[@prasoonmishra7166]

👏👏

[@Fintelligents]

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[@133_dagapiyush4]

How to calculate present value

[@divyanshukumar1662]

At 12:00, if the strike price of call option is $200, and the value of underlying asset at maturity is let say $500. IN this case the person at long position will exercise the option and will buy the stock at $200 from the person at short position. In this case , person at the short position lost $500-$200 =$300 because if he had sell the stock at spot price he would have get $500. How in this case the person booked a arbitrage profit of $10. Can someone help me.

[@AmanKumar-nz5kl]

Upper bound is
spot price for call and
Strike price for put
Lower bound is
Spot - PV(K) OR 0 for call ( for both European and American )
PV(K) - Spot OR 0 for Put ( European )
K - Spot OR 0 for Put ( American )
It's not good to exercise American Options earlier for the reason of loss of extrinsic value.
If is not deep ITM.

[@kunalsethia5588]

Sir can a non maths student pursue frm?

[@Fintelligents]

Yes dear Non Maths students can also apply for the exam

[@nikunjgattani999]

Thank You Sir

[@rajatrajawat2534]

True Gem.

[@mythilisasidhar4181]

Thank you sir