The value of a put option is positively related to the
A)exercise price, time to expiration, and volatility of the underlying stock price.
B)time to expiration, volatility of the underlying stock price, and risk-free rate.
C)exercise price, time to expiration, and risk-free rate.
D)risk-free rate.

Question

Quizplus · Accepted Answer

The value of a put option increases with a higher exercise price (as it becomes more valuable to sell the stock at a higher price), longer time to expiration (as there is more time for the stock price to drop below the exercise price), and greater volatility of the underlying stock price (as there is a higher chance of the stock price dropping below the exercise price). The risk-free rate does not have a significant impact on the value of a put option.

The Value of a Put Option Is Positively Related to the