Which of the following factors affects the price of an option?

A) time to expiry
B) risk-free rate of return
C) exercise price
D) all of these options

Question

Which of the following factors affects the price of an option?

A) time to expiry
B) risk-free rate of return
C) exercise price
D) all of these options

Quizplus · Accepted Answer

Option prices can be expressed as a function of six factors.These are the underlying asset price,the exercise price,the time to expiry,the standard deviation of asset returns,the risk-free rate of return and dividends or cash flows attached to the underlying asset that are expected during the life of the option.

Which of the Following Factors Affects the Price of an Option