What non-derivative financial position

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Reference no: EM131577582

Options R Us is thinking about producing an option pricing model to help their brokers sell options to their clients. Design and build a model to compare the price with the intrinsic value of an option. Set the initial parameters to;

rf=3%cc

T=0.25 years

standard deviation =30% annually

X=$50

To further the ability to sell their clients on holding portfolios of options, they want the model to handle a two option portfolio. Keep in mind that the initial premiums can be reinvested at the risk free rate, or could have been if they paid the premium.

What non-derivative financial position does this option package effectively mirror? Why would this interest potential private clients?

Reference no: EM131577582

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